enough of privacy

PriL; Marriages

Paula Llorente vs. CA & Alicia Llorente; GR 124371

Facts: Lorenzo Llorente, former Filipino Citizen and a naturalized American Citizen, filed an application for divorce against Paula. He then married Alicia. He thereafter died, leaving a will, in favor of his spouse Alicia and 3 children (2 of whom not legally adopted, 1 natural child). His ex-wife, Paula, filed a petition for issuance of letters testamentary in her favor. The RTC favored Paula thru the application of Philippine Law (that the will was intrinsically invalid since the same contained dispositions in favor of Alice, a paramour under Phil. Law). On appeal, the CA disregarded the will and declared Alicia as a co-owner.

Issues: (1) WON the divorce obtained by Lorenzo capacitated him to remarry; (2) WON the will is valid.

Held:

(1) The divorce obtained by Lorenzo abroad is recognized here in the Phil. as a matter of comity:

(a) The Nationality Principle in Civil Law on the status of persons;

(b) Only Phil. Nationals are covered by the policy against absolute divorce;

(c) Aliens may obtain divorce abroad, provided they are valid according to their national law.

(2) The SC remanded the case to the trial court to determine the intrinsic validity of the will. Foreign law must be pleaded and proved. The formal validity, however, was properly determined by the trial court.

Grace Garcia vs. Rederick Recio; GR 138322

Facts: Rederick, when still a Filipino, married Editha, an Australian citizen. A decree of divorce was purportedly issued by an Australian family court. Later on, Rederick became an Australian citizen. He then married Petitioner Grace, a Filipino. Grace thereafter filed a petition for Declaration of Nullity of Marriage on the ground of bigamy – that Rederick had no legal capacity to marry at the time of their marriage having been still married to Editha. Rederick contended that he had legal capacity and he obtained a divorce decree from a family court in Sydney, Australia. The RTC declared the first marriage (b/w Rederick and Editha) dissolved based on the divorce decree obtained by Rederick.

Issue: WON the divorce decree obtained by Rederick ipso facto capacitated him to remarry.

Held: The SC remanded the case to the trial court to receive evidence to show Rederick’s legal capacity to marry Petitioner Grace. The court said that it cannot conclude that respondent was legally capacitated  to marry Petitioner because there is absolutely no evidence that can prove respondent’s capacity to marry.

The Court cannot also grant Petitioner’s prayer to declare the her marriage to respondent null and void on the ground of bigamy. For after all, it may turn out that under Australian law, he was really capacitated to marry petitioner as a direct result of the divorce decree.

It was thus enunciated in the case this basic legal principle: A marriage between two Filipinos cannot be dissolved even by a divorce obtained abroad because of Article 15 and 17 of the Civil Code.

ART. 15. Laws relating to family rights and duties, or to the status, condition and legal capacity of persons are binding upon citizens of the Philippines, even though living abroad.”

 “ART. 17. The forms and solemnities of contracts, wills, and other public instruments shall be governed by the laws of the country in which they are executed.

Wolfgang Roehr vs. Maria Carmen Rodriguez & Hon. Judge Guevarra-Salonga; GR 142820

Facts: Roehr, German Citizen, and Rodriguez, Filipino, were married in Germany. The same was subsequently ratified in Negros Occidental. They had 2 children. Rodriguez filed a petition for decree of nullity of marriage at the RTC-Makati. Roehr, however, obtained a decree of divorce from the CFI of Hamburg, Germany. Roehr thus fied a motion to dismiss the petition for declation of nullity of marriage on the ground that the RTC had no jurisdiction over the same as a divorce decree had already been promulgated. Judge Guevarra-Salonga recognized the divorce decree, however, ordered that its court shall determine still the issue regarding the custody of the 2 children and the settlement of property relations of the parties.

Issue: WON the RTC/Phil. Courts has/have jurisdiction to pass upon matters that spring from a divorce decree obtained abroad.

Held: Yes.

As a general rule, divorce decrees obtained by foreigners in other countries are recognizable in our jurisdiction, but the legal effects thereof, e.g. on custody, care and support of the children, must still be determined by our courts.²³ Before our courts can give the effect of res judicata to a foreign judgment, such as the award of custody to petitioner by the German court, it must be shown that the parties opposed to the judgment had been given ample opportunity to do so.

In the present case, it cannot be said that private respondent was given the opportunity to challenge the judgment of the German court so that there is basis for declaring that judgment as res judicata with regard to the rights of petitioner to have parental custody of their two children.

Absent any finding that private respondent is unfit to obtain custody of the children, the trial court was correct in setting the issue for hearing to determine the issue of parental custody, care, support and education mindful of the best interests of the children.

With regard to the property relations, given the factual admission by the parties in their pleadings that there is no property to be accounted for, respondent judge has no basis to assert jurisdiction in this case to resolve a matter no longer deemed in controversy.

Republic of the Phil vs. Cipriano Orbecido III; GR 154380

Facts:At the time the marriage of Cipriano and Lady Myros were solemnized, they were both Filipinos. Later on, however, Lady Myros went to the US, was naturalized, obtained a divorce decree, and thereafter remarried. Cipriano, now wants to obtain an authority to remarry based on Par. (2), Art 26, Family Code. The OSG, however, contends that the Rule applies only to a valid mixed marriage, that is, a marriage celebrated between a Filipino Citizen and an alien.

Issue: WON Par. (2), Art. 26, Family Code, applies to a case where at the time of the celebration of the marriage, the parties were Filipino citizens, but later on, one of them obtains a foreign citizenship by naturalization.

Held: Yes.

Paragraph 2 of Article 26 of the Family Code (E.O. No. 209, as amended by E.O. No. 227), should be interpreted to allow a Filipino citizen, who has been divorced by a spouse who had acquired foreign citizenship and remarried, also to remarry. 

The twin elements for the application of Paragraph 2 of Article 26 as follows:

1.                  There is a valid marriage that has been celebrated between a Filipino citizen and a foreigner; and

2.                  A valid divorce is obtained abroad by the alien spouse capacitating him or her to remarry.

The reckoning point is not the citizenship of the parties at the time of the celebration of the marriage, but their citizenship at the time a valid divorce is obtained abroad by the alien spouse capacitating the latter to remarry.

In this case, when Cipriano’s wife was naturalized as an American citizen, there was still a valid marriage that has been celebrated between her and Cipriano.  As fate would have it, the naturalized alien wife subsequently obtained a valid divorce capacitating her to remarry.  Clearly, the twin requisites for the application of Paragraph 2 of Article 26 are both present in this case.  Thus Cipriano, the “divorced” Filipino spouse, should be allowed to remarry.

However, considering that in the present petition there is no sufficient evidence submitted and on record, we are unable to declare, based on respondent’s bare allegations that his wife, who was naturalized as an American citizen, had obtained a divorce decree and had remarried an American, that respondent is now capacitated to remarry.  Such declaration could only be made properly upon respondent’s submission of the aforecited evidence in his favor.

Gerbert R. Corpuz vs. Daisylyn Sto. Tomas & SolGen; GR 186571

Facts: Gerbert, a former Filipino Citizen, acquired Canadian Citizenship. He then married a Filipino, Daisilyn. Devastated by the fact that Daisylyn have had an affair, he obtained a divorce decree in Canada.

He then wanted to contract a subsequent marriage, thus, registered the Canadian divorce decree on their marriage certificate. However, an officer of NSO informed him that his marriage to Daisylyn still subsists under Philippine Laws, and that to be enforceable, the foreign divorce decree must first be judicially recognized by a competent Philippine court.

Hence, Gerbert filed a petition for judicial recognition of foreign divorce and/or declaration of marriage as dissolved (petition) with the RTC. RTC denied Gerbert’s petition. The RTC concluded that Gerbert was not the proper party to institute the action for judicial recognition of the foreign divorce decree as he is a naturalized Canadian citizen. It ruled that only the Filipino spouse can avail of the remedy, under the second paragraph of Article 26 of the Family Code, in order for him or her to be able to remarry under Philippine law.

Issue: WON the benefits of Par. (2), rt. 26, Family Code, can be availed of by an alien.

Held: Generally, No.

The alien spouse can claim no right under the second paragraph of Article 26 of the Family Code as the substantive right it establishes is in favor of the Filipino spouse

There is a qualification to this, however – i.e., that the second paragraph of Article 26 of the Family Code bestows no rights in favor of aliens – with the complementary statement that this conclusion is not sufficient basis to dismiss Gerbert’s petition before the RTC. In other words, the unavailability of the second paragraph of Article 26 of the Family Code to aliens does not necessarily strip Gerbert of legal interest to petition the RTC for the recognition of his foreign divorce decree. The foreign divorce decree itself, after its authenticity and conformity with the alien’s national law have been duly proven according to our rules of evidence, serves as a presumptive evidence of right in favor of Gerbert, pursuant to Section 48, Rule 39 of the Rules of Court which provides for the effect of foreign judgments.

A remand, at the same time, will allow other interested parties to oppose the foreign judgment and overcome a petitioner’s presumptive evidence of a right by proving want of jurisdiction, want of notice to a party, collusion, fraud, or clear mistake of law or fact. Needless to state, every precaution must be taken to ensure conformity with our laws before a recognition is made, as the foreign judgment, once recognized, shall have the effect of res judicata³² between the parties, as provided in Section 48, Rule 39 of the Rules of Court.

Insurance (Premium); UCPB Gen. Insurance Co. (Insurer) vs Masagana Telemart (Insured), Makati Tuscany Condo Corp. vs. CA, American Home Assurance Co. (AHAC), Sps. Tibay vs. CA and Fortune Life and General Insurance Co.

UCPB Gen. Insurance Co. (Insurer) vs Masagana Telemart (Insured)

G.R. No. 137172 June 15, 1999

Facts: Insurer issued 5 fire insurance policies covering various properties of the Insured (covering the period May 22, 1991-May 22, 1992). Before the expiration of the policy (March 1992), Insurer evaluated the policy and decided not to renew them. Thus, Insurer issued a notice of non-renewal to Insured’s broker Zuellig (on April 1992). After the expiration of the policy (or on June 13, 2012), fire razed Insured’s property covered by 3 policies. A month later, Insured presented 5 checks to the Insurer’s cashier as payment for the renewal of the policy (from May 1192-May 1993), however, no notice of loss was ever filed by Insured. Insurer refused to pay on the ground that the policies had already expired and were not renewed, and that the fire occurred before payment of the premium (for renewal).

RTC: Insured fully complied with its duty to pay premium.

CA: following previous practice, Insured was allowed a 60-90 day credit term for the renewal of its policy, and that the acceptance of the late premium payment suggested an understanding that payment could be made later, and that no timely notice of non-renewal was sent.

Issue: Whether the fire insurance policies issued by Insurer to Insured had expired on May 1992 or had been extended or renewed by an implied credit arrangement (even though actual tender of payment was made after the occurrence of the fire).

Held: No, the insurance policies had not been renewed.

An insurance policy, other than life, issued originally or on renewal, is not valid and binding until actual payment of the premium. Any agreement to the contrary is void. 

 The parties may not agree expressly or impliedly on the extension of creditor time to pay the premium and consider the policy binding before actual payment.

Here, the payment of the premium for renewal of the policies was tendered on July 13, 1992, a month after the fire occurred on June 13, 1992. The assured did not even give the insurer a notice of loss within a reasonable time after occurrence of the fire.

Makati Tuscany Condo Corp. vs. CA, American Home Assurance Co. (AHAC)

G.R. No. 95546 November 6, 1992

Facts: Insurer, AHAC, issued an insurance policy on Tuscany’s building and premises covering a one-year period. Payment was agreed by both parties to be staggered (5 installments). The 1982 and 1983 policies had been fully paid. For the 1984 policy, Insured paid only 2 installments and refused to pay the balance on the ground that the policy did not contain a credit clause in its favor, that it was not binding and risk never attached, thus, demanded for refund of the premiums paid. But insurer wants to recover the unpaid balances.

Trial Court: Dismissed Insurer’s action to recover as well as Insured’s counterclaim for refund.

CA: The insurance contract became valid and binding upon payment of the first premium, and the Insurer could not have denied liability on the ground that payment was not made in full, for the reason that it agreed to accept installment payment.

Tuscany appealed to SC on the ground: There cannot be a perfected contract of insurance upon mere partial payment of the premiums because under Sec. 77 of the Insurance Code, no contract of insurance is valid and binding unless the premium thereof has been paid, notwithstanding any agreement to the contrary.

Issue: Whether payment by installment of the premiums due on an insurance policy invalidates the contract of insurance, in view of Sec. 77 of the Insurance Code, as amended.

Held: The subject policies are valid even if the premiums were paid on installments. The records clearly show that petitioner and private respondent intended subject insurance policies to be binding and effective notwithstanding the staggered payment of the premiums. The initial insurance contract entered into in 1982 was renewed in 1983, then in 1984. In those three (3) years, the insurer accepted all the installment payments. Such acceptance of payments speaks loudly of the insurer’s intention to honor the policies it issued to petitioner. Certainly, basic principles of equity and fairness would not allow the insurer to continue collecting and accepting the premiums, although paid on installments, and later deny liability on the lame excuse that the premiums were not prepared in full.

While the import of Section 77 is that prepayment of premiums is strictly required as a condition to the validity of the contract, We are not prepared to rule that the request to make installment payments duly approved by the insurer, would prevent the entire contract of insurance from going into effect despite payment and acceptance of the initial premium or first installment. Section 78 of the Insurance Code in effect allows waiver by the insurer of the condition of prepayment by making an acknowledgment in the insurance policy of receipt of premium as conclusive evidence of payment so far as to make the policy binding despite the fact that premium is actually unpaid. Section 77 merely precludes the parties from stipulating that the policy is valid even if premiums are not paid, but does not expressly prohibit an agreement granting credit extension, and such an agreement is not contrary to morals, good customs, public order or public policy. So is an understanding to allow insured to pay premiums in installments not so proscribed. At the very least, both parties should be deemed in estoppel to question the arrangement they have voluntarily accepted.

Petitioner may not be allowed to renege on its obligation to pay the balance of the premium after the expiration of the whole term of the third policy in March 1985. Moreover, as correctly observed by the appellate court, where the risk is entire and the contract is indivisible, the insured is not entitled to a refund of the premiums paid if the insurer was exposed to the risk insured for any period, however brief or momentary.

Sps. Tibay vs. CA and Fortune Life and General Insurance Co.

G.R. No. 119655 May 24, 1996

Facts: Insurer, Fortune, issued a fire insurance policy in favor of insured on their two-storey residential building (January 23, 1987 to January 23, 1988). Insured paid P600 out of the P2,983.50 premium. About 2 months later (or on March 8, 1987), the subject property was completely destroyed by fire. Two days later, Insured paid the balance. She also filed a claim to the proceeds. Insurer refused on the ground that Insured violated one of the terms, re: that the policy shall be valid and effective upon the Company only when the premiums have actually been paid in full. Hence, Insured sued Insurer for damages.

TC: Favored Insured (Insurer liable).

CA: Reversed TC ruling (Insurer not liable).

Issue: WON the fire insurance policy is binding and enforceable despite the fact that the premium was merely partially paid.

Held: The insurance policy is not binding and enforceable (Insurer not liable).

Ratio:

1. The policy provides for payment of premium in full. Accordingly, where the premium has only been partially paid and the balance paid only after the peril insured against has occurred, the insurance contract did not take effect and the insured cannot collect at all on the policy.

Sec. 77. An insurer is entitled to payment of the premium as soon as the thing insured is exposed to the peril insured against. Notwithstanding any agreement to the contrary, no policy or contract of insurance issued by an insurance company is valid and binding unless and until the premium thereof has been paid, except in the case of a life or an industrial life policy whenever the grace period provision applies.

2. The Phoenix and Tuscany Rulings are not persuasive because the factual scenarios are not the same. These two (2) cases adequately demonstrate the waiver, either express or implied, of prepayment in full by the insurer: impliedly, by suing for the balance of the premium as in Phoenix, and expressly, by agreeing to make premiums payable in installments as in Tuscany. But contrary to the stance taken by petitioners, there is no waiver express or implied in the case at bench.

3. The cardinal polestar in the construction of an insurance contract is the intention of the parties as expressed in the policy. Verily, it is elemental law that the payment of premium is requisite to keep the policy of insurance in force. If the premium is not paid in the manner prescribed in the policy as intended by the parties the policy is ineffective. Partial payment even when accepted as a partial payment will not keep the policy alive even for such fractional part of the year as the part payment bears to the whole payment.

4. The case of South Sea Surety and Insurance Company, Inc. v. Court Of Appeals, speaks only of two (2) statutory exceptions to the requirement of payment of the entire premium as a prerequisite to the validity of the insurance contract. These exceptions are: (a) in case the insurance coverage relates to life or industrial life (health) insurance when a grace period applies, and (b) when the insurer makes a written acknowledgment of the receipt of premium, this acknowledgment being declared by law to be then conclusive evidence of the premium payment. A maxim of recognized practicality is the rule that the expressed exception or exemption excludes others. Exceptio firmat regulim in casibus non exceptis. Thus, under Sec. 77, as well as Sec. 78, until the premium is paid, and the law has not expressly excepted partial payments, there is no valid and binding contract. Hence, in the absence of clear waiver of prepayment in full by the insurer, the insured cannot collect on the proceeds of the policy. In this case, the law is manifestly on the side of the insurer. For it cannot be disputed that premium is the elixir vitae of the insurance business because by law the insurer must maintain a legal reserve fund to meet its contingent obligations to the public, hence, the imperative need for its prompt payment and full satisfaction. 

6. The term of these insurance policies constitute the measure of the insurer’s liability. In the absence of statutory prohibition to the contrary, insurance companies have the same rights as individuals to limit their liability and to impose whatever conditions they deem best upon their obligations not inconsistent with public policy. The validity of these limitations is by law passed upon by the Insurance Commissioner who is empowered to approve all forms of policies, certificates or contracts of insurance which insurers intend to issue or deliver. That the policy contract in the case at bench was approved and allowed issuance simply reaffirms the validity of such policy, particularly the provision in question.

Sunlife AssuranceCompany of Canada vs. CA and Bacani up to Ng Gan Zee vs Asian Crusader Life Assurance Corp only

Sunlife AssuranceCompany of Canada vs. CA and Bacani

Facts: Robert Bacani procured a life insurance contract for himself from petitioner; her mother, the beneficiary. Robert died in a plane crash. Robert’s mother filed a claim from petitioner but the latter refused, alleging that there had been concealment, by Robert’s failure to disclose some material facts regarding the insurance policy, Re: that 2 weeks prior to his application for insurance policy, he had been hospitalized… The TC favored Robert’s mother ruling that (1) the concealment was made in good faith and (2) the health history was immaterial since the insurance poicy was non-medical. The CA agreed adding that the cause of death was unrelated to the facts concealed.

SC Ruling:

The decision of the CA should be reversed.

Section 26 of The Insurance Code is explicit in requiring a party to a contract of insurance to communicate to the other, in good faith, all facts within his knowledge which are material to the contract and as to which he makes no warranty, and which the other has no means of ascertaining.

MATERIALITY is to be determined not by the event, but solely by the probable and reasonable influence of the facts upon the party to whom communication is due, in forming his estimate of the disadvantages of the proposed contract or in making his inquiries. The information which the insured failed to disclose were material and relevant to the approval and issuance of the insurance policy. The matters concealed would have definitely affected petitioner’s action on his application, either by approving it with the corresponding adjustment for a higher premium or rejecting the same. Moreover, a disclosure may have warranted a medical examination of the insured by petitioner in order for it to reasonably assess the risk involved in accepting the application.

Thus, “good faith” is no defense in concealment. The insured’s failure to disclose the fact that he was hospitalized for two weeks prior to filing his application for insurance, raises grave doubts about his bonafides. It appears that such concealment was deliberate on his part.

… the waiver of a medical examination [in a non-medical insurance contract] renders even more material the information required of the applicant concerning previous condition of health and diseases suffered, for such information necessarily constitutes an important factor which the insurer takes into consideration in deciding whether to issue the policy or not … “

Moreover, such argument of private respondents would make Section 27 of the Insurance Code, which allows the injured party to rescind a contract of insurance where there is concealment, ineffective.

Anent the finding that the facts concealed had no bearing to the cause of death of the insured, it is well settled that the insured need not die of the disease he had failed to disclose to the insurer. It is sufficient that his non-disclosure misled the insurer in forming his estimates of the risks of the proposed insurance policy or in making inquiries.

Philamcare Health Systems, Inc.  vs CA & Julita Trinos

Facts: Ernani Trinos applied for a health care coverage with Philamcare. During the period of his coverage, Ernani suffered a heart attack and was confined for 1 month. Whie her husband was in the hospital, Julita tried to claim the benefits from Philamcare but the latter refused alleging that the Agreement was void on the ground of concealment regarding Ernani’s medical history, Re: that Ernani was hypertensive, diabetic and asthmatic, contrary to his answers in the application form. Subsequently, Ernani died. Julita filed an action for damages against Philamcare. The TC favored Julita, approved by the CA.

Issue: WON there had been material concealment on the part of Ernani.

Held: NONE

The answer assailed by petitioner was in response to the question relating to the medical history of the applicant. This largely depends on opinion rather than fact, especially coming from respondent’s husband who was not a medical doctor. Where matters of opinion or judgment are called for, answers made in good faith and without intent to deceive will not avoid a policy even though they are untrue.

Thus, although false, a representation of the expectation, intention, belief, opinion, or judgment of the insured will not avoid the policy if there is no actual fraud in inducing the acceptance of the risk, or its acceptance at a lower rate of premium, and this is likewise the rule although the statement is material to the risk, if the statement is obviously of the foregoing character, since in such case the insurer is not justified in relying upon such statement, but is obligated to make further inquiry. There is a clear distinction between such a case and one in which the insured is fraudulently and intentionally states to be true, as a matter of expectation or belief, that which he then knows, to be actually untrue, or the impossibility of which is shown by the facts within his knowledge, since in such case the intent to deceive the insurer is obvious and amounts to actual fraud.

The fraudulent intent on the part of the insured must be established to warrant rescission of the insurance contract. Concealment as a defense for the health care provider or insurer to avoid liability is an affirmative defense and the duty to establish such defense by satisfactory and convincing evidence rests upon the provider or insurer. In any case, with or without the authority to investigate, petitioner is liable for claims made under the contract. Having assumed a responsibility under the agreement, petitioner is bound to answer the same to the extent agreed upon. In the end, the liability of the health care provider attaches once the member is hospitalized for the disease or injury covered by the agreement or whenever he avails of the covered benefits which he has prepaid.

Under Section 27 of the Insurance Code, “concealment entitles the injured party to rescind a contract of insurance.” The right to rescind should be exercised previous to the commencement of an action on the contract. In this case, no rescission was made.

Pacific Life vs CA; Mondragon vs CA & Ngo Hing

Facts: Ngo Hing filed an application with Pacific Life for a 20-year endowment policy on the life of his 1yr old daughter Helen Go. Ngo Hing supplied the required data which Mondragon (Branch Manager of Pacific Life) wrote on the corresponding form and subsequently filed the same to Pacific Life. Ngo HIng also paid the annual premium. The latter however disapproved the application on the ground that the policy being applied for is not available for minors below 7 years of age and recommended another policy. Helen Go died of influenza with complication of bronchopneumonia. Ngo Hing sought the payment of the proceeds. Pacific Life refused alleging that the contract was void though the concealment (by Ngo HIng) of the health and physical conditions of Helen Go.

SC Ruling:

Relative to issue of alleged concealment, this Court is of the firm belief that private respondent (Ngo Hing) had deliberately concealed the state of health and physical condition of his daughter Helen Go. When private respondent supplied the required essential data for the insurance application form, he was fully aware that his one-year old daughter is typically a mongoloid child. Such a congenital physical defect could never be ensconced nor disguised. Nonetheless, private respondent, in apparent bad faith, withheld the fact material to the risk to be assumed by the insurance company. As an insurance agent of Pacific Life, he ought to know, as he surely must have known his duty and responsibility to such a material fact. Had he diamond said significant fact in the insurance application form Pacific Life would have verified the same and would have had no choice but to disapprove the application outright.

The contract of insurance is one of perfect good faith uberrima fides meaning good faith, absolute and perfect candor or openness and honesty; the absence of any concealment or demotion, however slight not for the alone but equally so for the insurer.

Concealment is a neglect to communicate that which a party knows and ought to communicate. Whether intentional or unintentional the concealment entitles the insurer to rescind the contract of insurance. Private respondent (Ngo Hing) appears guilty thereof.

Thelma Vda. De Canilang vs. CA & Pacific Life

Facts: Jaime Canilang applied for a non-medical insurance policy with Pacific Life which the latter granted. Prior to such application, Jaime consulted a doctor and was diagnosed as suffering from sinus tachycardia and later on acute bronchitis. Jaime later on died of congestive heart failure. His wife, Thelma, as beneficiary, filed a claim with Pacific Life but the latter denied alleging that the insured had concealed material information from it. The Insurance Commissioner favored Thelma Canilang and ruled: (1) Jaime’s illness was not so serious that even if it were disclosed it would not have affected Pacific Life’s decision; Pacific Life waived its right to inquire into the health condition of Jaime when it granted the application despite some of the questions were left unanswered; (3) no intentional concealment on Jaime’s part as he was thinking that he had been suffering merely from a minor ailment and simple cold. The CA reversed the Insurance Commissioner’s decision.

SC Ruling:

SC agreed with CA.

We agree with the Court of Appeals that the information which Jaime Canilang failed to disclose was material to the ability of Great Pacific to estimate the probable risk he presented as a subject of life insurance. Had Canilang disclosed his visits to his doctor, the diagnosis made and medicines prescribed by such doctor, in the insurance application, it may be reasonably assumed that Great Pacific would have made further inquiries and would have probably refused to issue a non-medical insurance policy or, at the very least, required a higher premium for the same coverage. 

The materiality of the information withheld by Great Pacific did not depend upon the state of mind of Jaime Canilang. A man’s state of mind or subjective belief is not capable of proof in our judicial process, except through proof of external acts or failure to act from which inferences as to his subjective belief may be reasonably drawn. Neither does materiality depend upon the actual or physical events which ensue. MATERIALITY RELATES rather to the “probable and reasonable influence of the facts” upon the party to whom the communication should have been made, in assessing the risk involved in making or omitting to make further inquiries and in accepting the application for insurance; that “probable and reasonable influence of the facts” concealed must, of course, be determined objectively, by the judge ultimately.

The restoration in 1985 by B.P. Blg. 874 of the phrase “whether intentional or unintentional” merely underscored the fact that all throughout (from 1914 to 1985), the statute did not require proof that concealment must be “intentional” in order to authorize rescission by the injured party.

In any case, in the case at bar, the nature of the facts not conveyed to the insurer was such that the failure to communicate must have been intentional rather than merely inadvertent. For Jaime Canilang could not have been unaware that his heart beat would at times rise to high and alarming levels and that he had consulted a doctor twice in the two (2) months before applying for non-medical insurance.

We find it difficult to take seriously the argument that Great Pacific had waived inquiry into the concealment by issuing the insurance policy notwithstanding Canilang’s failure to set out answers to some of the questions in the insurance application. Such failure precisely constituted concealment on the part of Canilang.

Ng Gan Zee vs Asian Crusader Life Assurance Corp

Facts: Kwong Nam applied for a 20yr endowment insurance on his life, naking his wife, Ng Gan Zee as beneficiary. All premiums had been paid, Kwong Nam died of cancer of the liver with metastasis. Ng Gan Zee presented a claim against the insurer but the latter refused despite orders of the Insurance Commissioner. Insurer alleged concealment when he gave an information, re: that he was operated on for a tumor which had been associated with ulcer of stomach and that a tumor, hard and a hen’s egg sized had been removed, when in fact he had peptic ulcer.

Issue: WON insurer, because of the insured’s representation, had been misled or deceived into entering the contract.

Held: No. (See Sec. 27)

“Concealment exists where the assured had knowledge of a fact material to the risk, and honesty, good faith, and fair dealing requires that he should communicate it to the assurer, but he designedly and intentionally withholds the same.” It has also been held “that the concealment must, in the absence of inquiries, be not only material, but fraudulent, or the fact must have been intentionally withheld.” 

Assuming that the aforesaid answer given by the insured is false, as claimed by the appellant. Sec. 27 of the Insurance Law nevertheless requires that fraudulent intent on the part of the insured be established to entitle the insurer to rescind the contract. And as correctly observed by the lower court, “misrepresentation as a defense of the insurer to avoid liability is an ‘affirmative’ defense. The duty to establish such a defense by satisfactory and convincing evidence rests upon the defendant. The evidence before the Court does not clearly and satisfactorily establish that defense.”

It bears emphasis that Kwong Nam had informed the appellant’s medical examiner that the tumor for which he was operated on was “associated with ulcer of the stomach.” In the absence of evidence that the insured had sufficient medical knowledge as to enable him to distinguish between “peptic ulcer” and “a tumor”, his statement that said tumor was “associated with ulcer of the stomach, “ should be construed as an expression made in good faith of his belief as to the nature of his ailment and operation. Indeed, such statement must be presumed to have been made by him without knowledge of its incorrectness and without any deliberate intent on his part to mislead the appellant.

While it may be conceded that, from the viewpoint of a medical expert, the information communicated was imperfect, the same was nevertheless sufficient to have induced appellant to make further inquiries about the ailment and operation of the insured.

Section 32 of Insurance Law [Act No. 24271 provides as follows: Section 32. The right to information of material facts maybe waived either by the terms of insurance or by neglect to make inquiries as to such facts where they are distinctly implied in other facts of which information is communicated. It has been held that where, upon the face of the application, a question appears to be not answered at all or to be imperfectly answered, and the insurers issue a policy without any further inquiry, they waive the imperfection of the answer and render the omission to answer more fully immaterial. As aptly noted by the lower court, “if the ailment and operation of Kwong Nam had such an important bearing on the question of whether the defendant would undertake the insurance or not, the court cannot understand why the defendant or its medical examiner did not make any further inquiries on such matters from the Chinese General Hospital or require copies of the hospital records from the appellant before acting on the application for insurance. The fact of the matter is that the defendant was too eager to accept the application and receive the insured’s premium. It would be inequitable now to allow the defendant to avoid liability under the circumstances.”

Some Case Digests (5 only) in Evidence

Pascor vs. NLRC & Rances; GR 76595; May 6, 1988

Re: Authentication

Facts: Due to a POEA decision rendering Rances (employee of Pascor) as being liable for inciting another officer to insubordination etc., Rances sought to enforce an award allegedly granted him by a Dubai Court against Pascor’s foreign principal. Rances presented as evidence what purports to be an “original copy of the decision” of the Dubai court written in Arabic script and language, with a copy of an English translation by an unidentified translator and a copy of a transmittal letter signed by one Mohd Bin Saleh “Honorary Consul for Philippines.”

Issue: WON the Dubai decision can be enforced against Pascor.

Held: NEGATIVE.

Rances failed to submit any attestation issued by the proper Dubai official having legal custody of the original of the decision of the Dubai Court that the copy presented by said respondent is a faithful copy of the original decision, which attestation must furthermore be authenticated by a Philippine Consular Officer having jurisdiction in Dubai. The transmittal letter signed by Mohd Bin Saleh, Honorary Consul for Philippines’ does not comply with the requirements of either the attestation under Section 26 nor the authentication envisaged by Section 25. 

The Dubai decision is accompanied by a document which purports to be an English translation of that decision, but that translation is legally defective. Section 34 of Rule 132 of the Revised Rules of Court requires that documents written in a non-official language (like Arabic) shall not be admitted as evidence unless accompanied by a translation into English or Spanish or Filipino. 

There is no showing of who effected the English translation of the Dubai decision which respondent Rances submitted to the POEA. The English translation does not purport to have been made by an official court interpreter of the Philippine Government nor of the Dubai Government. Neither the Identity of the translator nor his competence in both the Arabic and English languages has been shown. The English translation submitted by the respondent is not sworn to as an accurate translation of the original decision in Arabic. Neither has that translation been agreed upon by the parties as a true and faithful one.

Sps Mapue vs. IAC; GR 70856; Nov. 11, ‘87

Re: Public Documents are presumed to have been regularly executed

Facts: Sps Mapue obtained a loan from respondents in the amount of P19,500 evidenced by a promissory note and an original real estate mortgage ratified by a Notary Public. Subsequently, Sps obtained an additional loan resulting to an amended real estate mortgage ratified by another Notary Public. Sps failed to pay, thus being the only bidder, defendant extra-judicially foreclosed the mortgage. Sps moved to set aside the foreclosure on the ground of fraud.

Issue: WON the extrajudicial foreclosure can be set aside on the ground of fraud in the execution of the original real estate mortgage/amended real estate mortgage.

Held: NEGATIVE.

The evidentiary value of a notarial document guaranteed by public attestation in accordance with law must be sustained in full force and effect unless impugned by strong, complete and conclusive proof.

Under the law they are entitled to full faith and credit upon their face. In fact, it has long been settled that a public document executed and attested through the intervention of the notary public is evidence of the facts in clear, unequivocal manner therein expressed. It has in its favor the presumption of regularity. To contradict all these, there must be evidence that is clear., convincing and more than merely preponderant.

People vs Guamos; GR 109662; Feb. 21, ‘95

Re: Testing the accuracy/credibility of witness

Facts: Guamos was found guilty of raping Michele (then 8 years old). On appeal of the decision of the trial court, Guamos sought to discredit and exclude the testimony of the rape victim upon the ground that she had not answered the questions posed to her at cross-examination during trial (which were complicated to be answered for adults more so for a 9 year old).

Issue: WON the testimony of Michele should be discredited.

Held: NEGATIVE.

It is the right of every party to cross-examine a witness “with sufficient fullness and freedom to test his [or her] accuracy and truthfulness and freedom from interest or bias, or the reverse, and to elicit all important facts bearing upon the issue.”  It is also the duty of the witness to answer questions put to him or her, subject to certain exceptions.In the instant case, defense counsel did not ask the Court to enforce his right and to compel the witness (Michelle) to perform her duty. As noted, the trial judge had instructed defense counsel to simplify his questions. Defense counsel, for his part, neither complained about this directive nor complied with it.

Counsel for appellant seeks to make much of the fact that Michelle Dolorical did not answer some of the questions of defense counsel on cross-examination. This failure does not detract from the admissibility or credibility of Michelle’s testimony. Firstly, this appears to the Court to be a case of failure of Michelle to answer some questions rather than an obstinate refusal to do so. In formulating those questions on cross-examination, defense counsel obviously did not take into account that he was cross-examining a child of tender age (Michelle was approximately nine [9] years of age at the time she gave her testimony in open court) susceptible to confusion and probably easily intimidated.

It is clear, that defense counsel exercised no substantial effort to present intelligible questions to complaining witness Michelle Dolorical designed to elicit straightforward answers. The Court considered  that she, in all probability, simply failed to grasp some of the questions put to her on cross-examinations. The defense had made it very difficult if not practically impossible for her to answer those questions intelligently and truthfully.

People vs. Manalo; GR L-55177; Feb. 27, ‘87

Re: Court may examine witness for clarificatory questions

Facts: Manalo pleaded guilty in killing his co-convict. On appeal he raised that the intervention made by the trial judge during cross-examination showed lack of impartiality and objectivity. And that by such act of intervention, the judge had already concluded that appellant was guilty of murder and had resolved to convict him; that the trial court had functioned “both as judge and prosecutor” asking questions of witnesses “calculated to establish treachery, premeditation and motive”; that the questions raised by the trial court were exceptionable ones, being “leading, misleading, caged for opinions or were objectionable on the ground of the witness’ incompetence”; and that therefore, appellant “never had a fair chance.” 

Issue: WON the act of intervention of the trial judge during cross examination deprived Manalo of his constitutional rights.

Held: NEGATIVE.

A trial judge is accorded reasonable leeway in putting such questions to witnesses as may be essential to elicit relevant facts and to make the record speak the truth. In such an effort, a judge may examine or cross-examine a witness. He may seek to draw out relevant and material testimony though that testimony may tend to support or rebut the position taken by one or the other party.

In the present case, the trial judge did not transgress the permissible limits of judicial inquiry. It appears that the judge merely sought to clarify to himself whether or not treachery and evident premeditation had indeed attended the killing of Alfredo dela Cruz, as alleged by the prosecution. All that the questions propounded by the judge indicates that he was not particularly skillful in cross-examination and that he found it difficult to operationalize words which themselves imported conclusions. Finally, the questions posed by the trial judge did not ultimately impose any prejudice upon Manalo. The questions raised by the trial judge sought to draw forth answers which did not relate to whether or not Manalo had in fact killed dela Cruz. Manalo had not only entered an intelligent and valid plea of guilty; that he had killed his fellow convict dela Cruz was established by independent and overwhelming evidence.

Villalon vs. IAC; GR 73751; Sept. 4, ‘86

Facts: A civil case for annulment of a deed of sale, among others, was filed by Neval et al against Atty. Villalon. Previously, Neval et al also filed a disbarment proceeding against Atty. Villalon. During the trial of the civil case, Atty. Villalon introduced in evidence some of Neval et al’s testimonies in the disbarment proceeding which were allegedly inconsistent with their testimonies in the civil case for the purpose of impeaching their testimonies. The trial court granted the Motion to Strike filed by Neval et al on the ground that its admission would violate the confidentiality of disbarment proceedings; and that the same cannot be waived.

Issue: WON the attorney subject of a disbarment proceeding may waive his right to its confidentiality and thus present the inconsistent testimonies therein in a civil case.

Held: AFFIRMATIVE.

By issuing its Order to strike, the Trial Court deprived petitioners of their right to impeach the credibility of their adverse parties’ witnesses (granted under Secs. 15 & 16 of R. 132) by proving that on former occasions they had made statements inconsistent with the statements made during the trial, despite the fact that such statements are material to the issues in the Civil Case. The subject matter involved in the disbarment proceedings i.e., the alleged falsification of the deed of absolute sale in petitioners’ favor, is the same issue raised in the Civil Case wherein the annulment of the said deed of absolute sale is sought.

While proceedings against attorneys should, indeed, be private and confidential except for the final order which shall be made public, that confidentiality is a privileged/ right which may be waived by the very lawyer in whom and for the protection of whose personal and professional reputation it is vested, pursuant to the general principle that rights may be waived unless the waiver is contrary to public policy, among others.In fact, the Court also notes that even private respondents’ counsel touched on some matters testified to by NEVAL in the disbarment proceedings and which were the subject of cross examination.

IP

Santos vs. McCullough Printing Comp.

Re: Unauthorized use, adoption and appropriation by the company of Santos’ intellectual creation/artistic design for a Christmas Card.

·         Santos/Malang designed a Christmas Card for the exclusive use of Ambassador Neri.

·         Such card carries Santo’s pen name – MALANG

·         The following year, the company which was the publisher of the Christmas Card, displayed the design and offered the same for sale, without the consent of Santos, their contention are as follows:

(1) the design does not contain clear notice that it belonged to Santos; and

(2) the design has been published  but does not contain a notice of copyright.

·         The TC rendered a decision against Santos.

Ruling: Malang is not entitled to protection.

Ratio:

·         No registration has been made. An intellectual creation should be copyrighted 30 days after its publication, if made in Manila, or within 60 days if made elsewhere, otherwise, the same shall become public property; and

·         Creation was not a limited one. For there to be a limited publication/prohibition, such fact must appear on the face of the design. When the purpose is a limited publication, but the effect is a general publication, irrevocable rights thereon become vested in the general public.

Filipino Society of Composers, Authors & Publishers, Inc. (plaintiff) vs. Tan (defendant)

Facts: Plaintiff is allegedly the owner of certain musical compositions.  Defendant, on the other hand, is the owner of a restaurant wherein a combo w/ professional singers is hired to entertain and amuse customers, and the same plays and sings plaintiff’s compositions without the latter’s permission. It is now the contention of the plaintiff that they are entitled the payment of license fee for such infringement, but such demand was ignored, thus, they filed a complaint for infringement of copyright. Defendant contends that the mere singing and playing of songs and popular tunes even if they are copyrighted do not constitute infringement. The lower court favored the defendant. The CA certified the case to the SC.

Issue: W/N defendant has infringed the copyright law for allowing the combo to sing and play the copyrighted musical compositions of the plaintiff without prior consent.

Held: Negative.

The playing and singing of the combo in defendant’s restaurant constituted performance for profit contemplated by the Copyright Law , nevertheless, Defendant’s allegation that the composers of the contested musical compositions waived their right in favor of the general public when they allowed their intellectual creations to become property of the public domain before applying for the corresponding copyrights for the same is correct.

An intellectual creation should be copyrighted thirty (30) days after its publication, if made in Manila, or within the (60) days if made elsewhere, failure of which renders such creation public property.” (Indeed, if the general public has made use of the object sought to be copyrighted for thirty (30) days prior to the copyright application the law deems the object to have been donated to the public domain and the same can no longer be copyrighted.

A careful study of the records reveals that the song “Dahil Sa Iyo” which was registered on April 20, 1956 (Brief for Appellant, p. 10) became popular in radios, juke boxes, etc. long before registration, etc. 

tax cases: cases #1,2,3,4,5,6,7,8,9,10,11,12,15,16

CIR vs. Algue

Facts: Algue, engaged in an engineering corporation, claims tax deductions in the amount of P75,000.00 alleging that such amount are promotional fees, thus, in accord with the provisions of the Tax Code as being ordinary and necessary expenses. The CIR disallowed the deductions.

Issue: WON the CIR was correct in disallowing the tax deductions.

Held: Negative.

The claimed deduction by the private respondent was permitted under the Internal Revenue Code and should therefore not have been disallowed by the CIR.

It is said that taxes are what we pay for civilization society. Without taxes, the government would be paralyzed for lack of the motive power to activate and operate it. The government for its part, is expected to respond in the form of tangible and intangible benefits intended to improve the lives of the people and enhance their moral and material values. This symbiotic relationship is the rationale of taxation and should dispel the erroneous notion that it is an arbitrary method of exaction by those in the seat of power.

But even as we concede the inevitability and indispensability of taxation, it is a requirement in all democratic regimes that it be exercised reasonably and in accordance with the prescribed procedure. If it is not, then the taxpayer has a right to complain and the courts will then come to his succor. For all the awesome power of the tax collector, he may still be stopped in his tracks if the taxpayer can demonstrate, as it has here, that the law has not been observed.

CIR vs. Tokyo Shipping Co., Ltd.

Facts: Tokyo shipping is a foreign corporation which owns and operates a vessel. The vessel was chartered by a certain Nasutra to load raw sugar in the Phil thru its representative. Thus, Tokyo Shipping’s representative made a pre-payment of the required income and common carrier’s taxes. Upon arrival at the port, the vessel found no sugar for loading, thus, claimed for a tax refund. The CIR failed to act promptly, thus, respondent went to CTA which decided in their favor. The CIR claims otherwise.

Issue: WON Tokyo Shipping is entitled to a tax refund.

Held: Affirmative.

Pursuant to section 24 (b) (2) of the National Internal Revenue Code, a resident foreign corporation engaged in the transport of cargo is liable for taxes depending on the amount of income it derives from sources within the Philippines. Thus, before such a tax liability can be enforced the taxpayer must be shown to have earned income sourced from the Philippines. The respondent court held that sufficient evidence has been adduced by the private respondent proving that it derived no receipt from its charter agreement with NASUTRA.

Fair deal is expected by our taxpayers from the BIR and the duty demands that BIR should refund without any unreasonable delay what it has erroneously collected.

The power of taxation is sometimes called also the power to destroy. Therefore it should be exercised with caution to minimize injury to the proprietary rights of a taxpayer. It must be exercised fairly, equally and uniformly, lest the tax collector kill the “hen that lays the golden egg.” And, in order to maintain the general public’s trust and confidence in the Government this power must be used justly and not treacherously.

BPI-Family Savings Bank vs. CA

Facts: BPI claims for a tax refund of P112,491. As appearing in its 1989 ITR, BPI has a total of P297,492 refundable taxes. BPI declared in its 1989 ITR that it would apply the excess withholding tax as a tax credit for the year 1990. Subsequently, however, BPI claimed for a tax refund since in the year 1990 it suffered losses, thus, could not have applied said amount as tax credit. The CIR and CTA denied this on the ground that BPI failed to show its 1990 ITR which would show that the amount claimed was not applied as a tax credit.

Issue: WON BPI is entitled to a tax refund.

Held: Affirmative.

Evidence shows that petitioner suffered a net loss in 1990, thus,  it could not have applied the amount claimed as tax credits.

Substantial justice, equity and fair play are on the side of petitioner. Technicalities and legalisms, however exalted, should not be misused by the government to keep money not belonging to it and thereby enrich itself at the expense of its law-abiding citizens. If the State expects its taxpayers to observe fairness and honesty in paying their taxes, so must it apply the same standard against itself in refunding excess payments of such taxes. Indeed, the State must lead by its own example of honor, dignity and uprightness.

PBCom vs. CA

Facts: PBCom in 1985 were issued tax debits in the total amount of P5,016,954. In 1986 it reported a net loss of P14,129,602, thus, declared no tax for that year. During these two years, however, PBCOm withheld and remitted to the BIR withholding creditable taxes of P282,795.50 in 1985 and P234,077.69 in 1986. On 1987, PBCom requested CIR to grant them a tax credit in the amount of P5,016,954 representing the overpayment in 1986. On 1988, it filed a claim for refund for property rentals (P282,795.50 in 1985 and P234,077.69). The CIR, affiermed by the CA, denied the claim for refund of P5,016,954 on the ground that it was filed beyond the reglementary period and also the claim for P234,077.69 on the ground that PBCom has opted and in all likelihood automatically credited the same to the succeeding year.

Issue: WON PBCom is entitled to tax refund.

Held: Negative.

Basic is the principle that “taxes are the lifeblood of the nation.” The primary purpose is to generate funds for the State to finance the needs of the citizenry and to advance the common weal. Due process of law under the Constitution does not require judicial proceedings in tax cases. This must necessarily be so because it is upon taxation that the government chiefly relies to obtain the means to carry on its operations and it is of utmost importance that the modes adopted to enforce the collection of taxes levied should be summary and interfered with as little as possible.

From the same perspective, claims for refund or tax credit should be exercised within the time fixed by law because the BIR being an administrative body enforced to collect taxes, its functions should not be unduly delayed or hampered by incidental matters.The rule states that the taxpayer may file a claim for refund or credit with the Commissioner of Internal Revenue, within two (2) years after payment of tax, before any suit in CTA is commenced. The two-year prescriptive period provided, should be computed from the time of filing the Adjustment Return and final payment of the tax for the year.

The non-retroactivity of rulings by the Commissioner of Internal Revenue is not applicable in this case because the nullity of RMC No. 7-85 was declared by respondent courts and not by the Commissioner of Internal Revenue. Lastly, it must be noted that, as repeatedly held by this Court, a claim for refund is in the nature of a claim for exemption and should be construed in strictissimi juris against the taxpayer.

Chavez vs. Ongpin

Facts: Chavez, owner of some number of parcels of land challenges the constitutionality of EO 73, which increased the assessment for real property taxes. Intervenor Realty Owners Association of the Phil (ROAP) also challenged the constitutionality of EO 73 and EO 464, the latter order having been the basis for the enactment of EO 73.

Issue: Whether EO 73 imposes unreasonable increase in real property taxes, thus, should be declared unconstitutional.

Held: Negative.

The attack on Executive Order No. 73 has no legal basis as the general revision of assessments is a continuing process mandated by Section 21 of Presidential Decree No. 464. If at all, it is Presidential Decree No. 464 which should be challenged as constitutionally infirm. However, Chavez failed to raise any objection against said decree. It was ROAP, the intervenor, which questioned the constitutionality thereof.

To continue collecting real property taxes based on valuations arrived at several years ago, in disregard of the increases in the value of real properties that have occurred since then, is not in consonance with a sound tax system. Fiscal adequacy, which is one of the characteristics of a sound tax system, requires that sources of revenues must be adequate to meet government expenditures and their variations.

Philex Mining Corp vs. CIR

Facts: The BIR sent a letter to Philex asking the latter to settle its tax liabilities. Philex protested the demand contending that it has pending claims for VAT input credit/refund for taxes it paid for the previous years. Thus, Philex wants to set-off or apply the concept of compensation in its favor. The BIR refused. The CTA, affirmed by CA, ruled against Philex stating that “taxes cannot be subject to set-off on compensation since claim for taxes is not a debt or contract.”

Issue: WON the pending claim for refund of Philex may be applied against an existing tax liability; or, WON Philex may set-off its tax liability against its pending claims for refund.

Held: Negative.

1. Taxes cannot be subject to compensation for the simple reason that the government and the taxpayer are not creditors and debtors of each other. There is a material distinction between a tax and debt. Debts are due to the Government in its corporate capacity, while taxes are due to the Government in its sovereign capacity;

2. Philex’s reliance on our holding in Commissioner of Internal Revenue v. Itogon-Suyoc Mines Inc., wherein the SC ruled that a pending refund may be set off against an existing tax liability even though the refund has not yet been approved by the Commissioner, is no longer without any support in statutory law.

It is important to note, that the premise of our ruling in the aforementioned case was anchored on Section 51 (d) of the National Revenue Code of 1939. However, when the National Internal Revenue Code of 1977 was enacted, the same provision upon which the Itogon-Suyoc pronouncement was based was omitted. Accordingly, the doctrine enunciated in Itogon-Suyoc cannot be invoked by Philex.

Gerochi, et al vs. Dept of Energy

Facts: Gerochi et al seeks the declaration of Sec. 34 of RA 9136 (Electric Power Industry Refor Act of 1991-EPIRA) which imposes a Universal Charge against all electric end-users on a monthly basis, as unconstitutional on the ground of: such universal charge is a tax, which power to impose is a strictly legislative function, thus, constitutes an undue delegation of legislative power on the part of the Energy Regulatory Commission (ERC).

Issue: Whether the universal charge is a tax; and, whether there is an undue delegation of legislative taxing power to ERC.

Held: Both negative.

1.  The conservative and pivotal distinction between power to tax and police power rests in the purpose for which the charge is made.  If generation of revenue is the primary purpose and regulation is merely incidental, the imposition is a tax; but if regulation is the primary purpose, the fact that revenue is incidentally raised does not make the imposition a tax.

It can be gleaned that the assailed Universal Charge is not a tax, but an exaction in the exercise of the State’s police power. Public welfare is surely promoted. 

Moreover, it is a well-established doctrine that the taxing power may be used as an implement of police power.

The Special Trust Fund reasonably serves and assures the attainment and perpetuity of the purposes for which the Universal Charge is imposed, i.e., to ensure the viability of the country’s electric power industry.

2. A logical corollary to the doctrine of separation of powers is the principle of non-delegation of powers, as expressed in the Latin maxim potestas delegata non delegari potest (what has been delegated cannot be delegated).

All that is required for the valid exercise of this power of subordinate legislation is that the regulation be germane to the objects and purposes of the law and that the regulation be not in contradiction to, but in conformity with, the standards prescribed by the law. These requirements are denominated as the completeness test and the sufficient standard test.

The Court finds that the EPIRA, read and appreciated in its entirety, in relation to Sec. 34 thereof, is complete in all its essential terms and conditions, and that it contains sufficient standards.

Roxas et al vs CTA

Facts: Roxas Y Cia is a partnership managing agricultural lands with a total land area of 19,000 ha (Known as the Nasugbu farmlands). The tenants therein wanted to acquire the land they till, thus the government persuaded Roxas Y Cia to sell to it some of its lands. Roxas Y Cia agreed but it turned out that the govt does not have sufficient funds to pay for such lands, hence, Roxas Y Cia took the burden of selling the lands directly to the tenants on installment basis. Because of Roxas Y Cia’s act of making profits from the purchase and sale of securities, the Commissioner of Internal Revenue demanded from it fixed tax of dealer’s securities, hence, 100% of the profits made therefrom was taxed.

Issue: WON the assessment made by the CIR is correct (of taxing 100% of the profits made from the sale of the lands to the tenants made by Roxas).

Held: Negative.

It should be borne in mind that the sale of the Nasugbu farm lands to the very farmers who tilled them for generations was not only in consonance with, but more in obedience to the request and pursuant to the policy of our Government to allocate lands to the landless.

The power of taxation is sometimes called also the power to destroy. Therefore it should be exercised with caution to minimize injury to the proprietary rights of a taxpayer. It must be exercised fairly, equally and uniformly, lest the tax collector kill the “hen that lays the golden egg”. And, in order to maintain the general public’s trust and confidence in the Government this power must be used justly and not treacherously. It does not conform with Our sense of justice in the instant case for the Government to persuade the taxpayer to lend it a helping hand and later on to penalize him for duly answering the urgent call.

In fine, Roxas y Cia. cannot be considered a real estate dealer for the sale in question. Hence, pursuant to Section 34 of the Tax Code the lands sold to the farmers are capital assets, and the gain derived from the sale thereof is capital gain, taxable only to the extent of 50%.

Phil Health Care Providers Inc vs CIR

Facts: Phil Health Care Providers is a corporationengaged in providing medical/health care programs to its members who pay annual membership fees. The CIR demanded from the corporation deficiency taxes, constituting Documentary Stamp Tax (DST) imposed upon on its health care agreements. The corporation sought the cancellation of the DST assessments, among others, contending that it is a Health Maintenance Org (HMO) and not an insurance company, thus, not liable for DST on its health care agreements. It also asserts that the assessed DST which amounts to P376 million is way beyond its net worth ofP259 million.

Issue: WON the corporation is liable for the payment of DST on its health care agreements.

Held: Negative.

As a general rule, the power to tax is an incident of sovereignty and is unlimited in its range, acknowledging in its very nature no limits, so that security against its abuse is to be found only in the responsibility of the legislature which imposes the tax on the constituency who is to pay it.So potent indeed is the power that it was once opined that “the power to tax involves the power to destroy.”

Given the realities on the ground, imposing the DST on petitioner would be highly oppressive. It is not the purpose of the government to throttle private business. On the contrary, the government ought to encourage private enterprise. The corporation, just like any concern organized for a lawful economic activity, has a right to maintain a legitimate business. As aptly held in Roxas, et al. v. CTA, et al.:

The power of taxation is sometimes called also the power to destroy. Therefore it should be exercised with caution to minimize injury to the proprietary rights of a taxpayer. It must be exercised fairly, equally and uniformly, lest the tax collector kill the “hen that lays the golden egg.”

Legitimate enterprises enjoy the constitutional protection not to be taxed out of existence. Incurring losses because of a tax imposition may be an acceptable consequence but killing the business of an entity is another matter and should not be allowed. It is counter-productive and ultimately subversive of the nation’s thrust towards a better economy which will ultimately benefit the majority of our people.

 CIR vs. Lingayen Gulf Electric Power Co & CTA

Facts: Lingayen operates an electric power plant, in which its municipal franchise imposes upon it the payment of not more than 2% franchise tax. Subsequently its franchise was approved by the Pres of the Phil. As such, the BIR demanded from it the payment of deficiency taxes applying franchise tax rates of 5% on gross receipts. Lingayen refused, as according to it, it made overpayment. Pending the cases, RA 3843 was approved which granted Lingayen legislative franchises for the operation of the electric light, etc., which imposed upon it the payment of only 2% franchise tax, effective from the date the original municipal franchise was granted. Thus, the CTA absolved Lingayen from all its liabilities. The CIR submits that RA 3843 in so far as it grants Lingayen the payment of only 2% Franchise tax is discriminatory and hence, violative of the rule on equality and uniformity of taxation as others are subject to 5% franchise tax.

Issue: WON the SC may determine the validity of RA 3843 as to its imposition of a 2% franchise tax in favor of Lingayen.

Held: Negative.

The SC has no authority to inquire into the wisdom of such act. R.A. No. 3843 did not only fix and specify a franchise tax of 2% on its gross receipts, but made it “in lieu of any and all taxes, all laws to the contrary notwithstanding,” thus, leaving no room for doubt regarding the legislative intent. “Charters or special laws granted and enacted by the Legislature are in the nature of private contracts. They do not constitute a part of the machinery of the general government. They are usually adopted after careful consideration of the private rights in relation with resultant benefits to the State … in passing a special charter the attention of the Legislature is directed to the facts and circumstances which the act or charter is intended to meet. The Legislature consider (sic) and make (sic) provision for all the circumstances of a particular case.” 

CIR vs. Judge Santos

Facts: The BIR examined the books and accounting records of Jewelry by Marco & Co. for excise tax purposes. Alleging that the provisions of the Tariff and Customs Code are oppressive and confiscatory, presenting on its behalf data on the differences of tax rates in Asia, sought said Code to declare unconstitutional. Judge Santos, an RTC judge, ruled in favor of Jewelry by Marco & Co, and declared that said law is inoperative and without force and effect as far as Jewelry by Marco & Co is concerned, or unconstitutional.

Issue: WON the RTC judge correctly declared some provisions of the Tariff and Customs Code as unconstitutional.

Held: Negative.

The trial court is not the proper forum for the ventilation of the issues raised by the private respondents. The arguments they presented focus on the wisdom of the provisions of law which they seek to nullify. Regional Trial Courts can only look into the validity of a provision, that is, whether or not it has been passed according to the procedures laid down by law, and thus cannot inquire as to the reasons for its existence. Granting arguendo that the private respondents may have provided convincing arguments why the jewelry industry in the Philippines should not be taxed as it is, it is to the legislature that they must resort to for relief, since with the legislature primarily lies the discretion to determine the nature (kind), object (purpose), extent (rate), coverage (subjects) andsitus (place) of taxation. This Court cannot freely delve into those matters which, by constitutional fiat, rightly rest on legislative judgment.

“The judiciary does not pass upon questions of wisdom, justice or expediency of legislation.” And fittingly so, for in the exercise of judicial power, we are allowed only “to settle actual controversies involving rights which are legally demandable and enforceable”, and may not annul an act of the political departments simply because we feel it is unwise or impractical. This is not to say that Regional Trial Courts have no power whatsoever to declare a law unconstitutional. In J.M. Tuason and Co. v. Court of Appeals, we said that “[p]lainly the Constitution contemplates that the inferior courts should have jurisdiction in cases involving constitutionality of any treaty or law, for it speaks of appellate review offinal judgments of inferior courts in cases where such constitutionality happens to be in issue.” This authority of lower courts to decide questions of constitutionality in the first instance reaffirmed in Ynos v. Intermediate Court of Appeals. But this authority does not extend to deciding questions which pertain to legislative policy.

Mactan Cebu Int’l Airport (MCIAA) vs Judge Marcos

Facts: MCIAA, since the time of its creation, enjoyed the privilege of exemption from payment of realty taxes in accordance with its charter. The Office of the Treasurer of the City of Cebu, however, demanded from it the payment of realty taxes over several parcels of land belonging to it. Mciaa was compelled to pay under protest, thus, it filed a petition for declaratory relief with the RTC. The latter dismissed the petition on the ground that under Sections 193 and 234 of the Local Gov’t Code of 1991 (LGC), such exemption from taxes in favor of GOCCs had been expressly cancelled/withdrawn.

Arguments:

MCIAA: Invokes Section 133 of the LGC which puts limitations on the taxing powers of LGUs on an instrumentality of the gov’t performing governmental functions (i.e. carrying out government policies of promoting and developing the Central Visayas and Mindanao regions as centers of int’l trade & tourism x x x)

Respondents: MCIAA is a GOCC whos tax exemption privilege had been withdrawn by virtue of Sections 193 & 234 of the LGC.

Issue: WON MCIAA< a GOCC, is exempted from the payment of realty taxes pursuant to Section 133 of the LGCC>

Held: Negative. The last paragraph of Section 234 unequivocally withdrew, upon the effectivity of the LGC, exemptions from real property taxes granted to natural or juridical persons, including government-owned or controlled corporations, except as provided in the said section, and the petitioner is, undoubtedly, a government-owned corporation, it necessarily follows that its exemption from such tax granted it in Section 14 of its charter, R.A. No. 6958, has been withdrawn. Any claim to the contrary can only be justified if MCIAA can show that the parcels of land in question, which are real property, are any one of those enumerated in Section 234, either by virtue of ownership, character, or use of the property.

As a general rule, the power to tax is an incident of sovereignty and is unlimited in its range, acknowledging in its very nature no limits, so that security against its abuse is to be found only in the responsibility of the legislature which imposes the tax on the constituency who are to pay it. Nevertheless, effective limitations thereon may be imposed by the people through their Constitutions. Our Constitution, for instance, provides that the rule of taxation shall be uniform and equitable and Congress shall evolve a progressive system of taxation. So potent indeed is the power that it was once opined that “the power to tax involves the power to destroy.” Verily, taxation is a destructive power which interferes with the personal and property for the support of the government. Accordingly, tax statutes must be construed strictly against the government and liberally in favor of the taxpayer. But since taxes are what we pay for civilized society, or are the lifeblood of the nation, the law frowns against exemptions from taxation and statutes granting tax exemptions are thus construed strictissimi juris against the taxpayers and liberally in favor of the taxing authority. A claim of exemption from tax payment must be clearly shown and based on language in the law too plain to be mistaken. Elsewise stated, taxation is the rule, exemption therefrom is the exception. However, if the grantee of the exemption is a political subdivision or instrumentality, the rigid rule of construction does not apply because the practical effect of the exemption is merely to reduce the amount of money that has to be handled by the government in the course of its operations. 

Tan Tiong Bio, et al vs CIR; GR L-15778

Facts: A corporation Central Syndicate, allegedly purchased from Dee Hong Lue stock of surplus properties from the Foreign Liquidation Commission. Thus, it remitted the amount of P43,750 as deposit for the sales tax. Later on, it claimed refund for the excess in the payment of the sales tax due to the adjustment and reduction of the purchase price. However, an agent of the CIR reported that it was the syndicate who was the actual importer and original seller of the surplus goods. Thus, the syndicate is liable to pay the whole amount of the sales tax. The CTA rendered a decision holding the incorporators of the syndicate to be severally liable, the syndicate’s personality having had expired.

Issue: WON the petitioners, the successors-in-interest of the defunct Central Syndicate, can be hel personally liable for the sales taxes.

Held: Affirmative.

Petitioners are the beneficiaries of the defunct corporation and as such should be held liable to pay the taxes. However, there being no express provision requiring the stockholders of the corporation to be solidarily liable for its debts which liability must be express cannot be presumed, petitioners should be held liable for the tax in question only in proportion to their shares in the distribution of the assets of the defunct corporation.

Lutz vs. Araneta (CIR)

Facts: Lutz, in his capacity as judicial administrator of the intestate estate of a certain Ledesma, assails the constitutionality of the imposition of export taxes under Commonwealth Act No. 567, otherwise known as the Sugar Adjustment Act.  Lutz alleges that the same is unconstitutional and void, being levied for the aid of the sugar industry exclusively, which in his opinion is not a pub;lic purpose for which a tax may be constitutionally levied. The action was dismissed by the CFI.

Issue: WON the imposition of the tax in question is unconstitutional, not being levied for public purpose.

Held: Negative.

The basic defect in the plaintiff’s position is his assumption that the tax provided for in Commonwealth Act No. 567 is a pure exercise of the taxing power. Analysis of the Act, and particularly of section 6 (heretofore quoted in full), will show that the tax is levied with a regulatory purpose, to provide means for the rehabilitation and stabilization of the threatened sugar industry. In other words, the act is primarily an exercise of the police power. It was competent for the legislature to find that the general welfare demanded that the sugar industry should be stabilized.

Even from the standpoint that the Act is a pure tax measure, it cannot be said that the devotion of tax money to experimental stations to seek increase of efficiency in sugar production, utilization of by-products and solution of allied problems, as well as to the improvements of living and working conditions in sugar mills or plantations, without any part of such money being channeled directly to private persons, constitutes expenditure of tax money for private purposes.

Tax: 1st to 9th

CIR vs. Algue

Facts: Algue, engaged in an engineering corporation, claims tax deductions in the amount of P75,000.00 alleging that such amount are promotional fees, thus, in accord with the provisions of the Tax Code as being ordinary and necessary expenses. The CIR disallowed the deductions.

Issue: WON the CIR was correct in disallowing the tax deductions.

Held: Negative.

The claimed deduction by the private respondent was permitted under the Internal Revenue Code and should therefore not have been disallowed by the CIR.

It is said that taxes are what we pay for civilization society. Without taxes, the government would be paralyzed for lack of the motive power to activate and operate it. The government for its part, is expected to respond in the form of tangible and intangible benefits intended to improve the lives of the people and enhance their moral and material values. This symbiotic relationship is the rationale of taxation and should dispel the erroneous notion that it is an arbitrary method of exaction by those in the seat of power.

But even as we concede the inevitability and indispensability of taxation, it is a requirement in all democratic regimes that it be exercised reasonably and in accordance with the prescribed procedure. If it is not, then the taxpayer has a right to complain and the courts will then come to his succor. For all the awesome power of the tax collector, he may still be stopped in his tracks if the taxpayer can demonstrate, as it has here, that the law has not been observed.

CIR vs. Tokyo Shipping Co., Ltd.

Facts: Tokyo shipping is a foreign corporation which owns and operates a vessel. The vessel was chartered by a certain Nasutra to load raw sugar in the Phil thru its representative. Thus, Tokyo Shipping’s representative made a pre-payment of the required income and common carrier’s taxes. Upon arrival at the port, the vessel found no sugar for loading, thus, claimed for a tax refund. The CIR failed to act promptly, thus, respondent went to CTA which decided in their favor. The CIR claims otherwise.

Issue: WON Tokyo Shipping is entitled to a tax refund.

Held: Affirmative.

Pursuant to section 24 (b) (2) of the National Internal Revenue Code, a resident foreign corporation engaged in the transport of cargo is liable for taxes depending on the amount of income it derives from sources within the Philippines. Thus, before such a tax liability can be enforced the taxpayer must be shown to have earned income sourced from the Philippines. The respondent court held that sufficient evidence has been adduced by the private respondent proving that it derived no receipt from its charter agreement with NASUTRA.

Fair deal is expected by our taxpayers from the BIR and the duty demands that BIR should refund without any unreasonable delay what it has erroneously collected.

The power of taxation is sometimes called also the power to destroy. Therefore it should be exercised with caution to minimize injury to the proprietary rights of a taxpayer. It must be exercised fairly, equally and uniformly, lest the tax collector kill the “hen that lays the golden egg.” And, in order to maintain the general public’s trust and confidence in the Government this power must be used justly and not treacherously.

BPI-Family Savings Bank vs. CA

Facts: BPI claims for a tax refund of P112,491. As appearing in its 1989 ITR, BPI has a total of P297,492 refundable taxes. BPI declared in its 1989 ITR that it would apply the excess withholding tax as a tax credit for the year 1990. Subsequently, however, BPI claimed for a tax refund since in the year 1990 it suffered losses, thus, could not have applied said amount as tax credit. The CIR and CTA denied this on the ground that BPI failed to show its 1990 ITR which would show that the amount claimed was not applied as a tax credit.

Issue: WON BPI is entitled to a tax refund.

Held: Affirmative.

Evidence shows that petitioner suffered a net loss in 1990, thus,  it could not have applied the amount claimed as tax credits.

Substantial justice, equity and fair play are on the side of petitioner. Technicalities and legalisms, however exalted, should not be misused by the government to keep money not belonging to it and thereby enrich itself at the expense of its law-abiding citizens. If the State expects its taxpayers to observe fairness and honesty in paying their taxes, so must it apply the same standard against itself in refunding excess payments of such taxes. Indeed, the State must lead by its own example of honor, dignity and uprightness.

PBCom vs. CA

Facts: PBCom in 1985 were issued tax debits in the total amount of P5,016,954. In 1986 it reported a net loss of P14,129,602, thus, declared no tax for that year. During these two years, however, PBCOm withheld and remitted to the BIR withholding creditable taxes of P282,795.50 in 1985 and P234,077.69 in 1986. On 1987, PBCom requested CIR to grant them a tax credit in the amount of P5,016,954 representing the overpayment in 1986. On 1988, it filed a claim for refund for property rentals (P282,795.50 in 1985 and P234,077.69). The CIR, affiermed by the CA, denied the claim for refund of P5,016,954 on the ground that it was filed beyond the reglementary period and also the claim for P234,077.69 on the ground that PBCom has opted and in all likelihood automatically credited the same to the succeeding year.

Issue: WON PBCom is entitled to tax refund.

Held: Negative.

Basic is the principle that “taxes are the lifeblood of the nation.” The primary purpose is to generate funds for the State to finance the needs of the citizenry and to advance the common weal. Due process of law under the Constitution does not require judicial proceedings in tax cases. This must necessarily be so because it is upon taxation that the government chiefly relies to obtain the means to carry on its operations and it is of utmost importance that the modes adopted to enforce the collection of taxes levied should be summary and interfered with as little as possible.

From the same perspective, claims for refund or tax credit should be exercised within the time fixed by law because the BIR being an administrative body enforced to collect taxes, its functions should not be unduly delayed or hampered by incidental matters.The rule states that the taxpayer may file a claim for refund or credit with the Commissioner of Internal Revenue, within two (2) years after payment of tax, before any suit in CTA is commenced. The two-year prescriptive period provided, should be computed from the time of filing the Adjustment Return and final payment of the tax for the year.

The non-retroactivity of rulings by the Commissioner of Internal Revenue is not applicable in this case because the nullity of RMC No. 7-85 was declared by respondent courts and not by the Commissioner of Internal Revenue. Lastly, it must be noted that, as repeatedly held by this Court, a claim for refund is in the nature of a claim for exemption and should be construed in strictissimi juris against the taxpayer.

Chavez vs. Ongpin

Facts: Chavez, owner of some number of parcels of land challenges the constitutionality of EO 73, which increased the assessment for real property taxes. Intervenor Realty Owners Association of the Phil (ROAP) also challenged the constitutionality of EO 73 and EO 464, the latter order having been the basis for the enactment of EO 73.

Issue: Whether EO 73 imposes unreasonable increase in real property taxes, thus, should be declared unconstitutional.

Held: Negative.

The attack on Executive Order No. 73 has no legal basis as the general revision of assessments is a continuing process mandated by Section 21 of Presidential Decree No. 464. If at all, it is Presidential Decree No. 464 which should be challenged as constitutionally infirm. However, Chavez failed to raise any objection against said decree. It was ROAP, the intervenor, which questioned the constitutionality thereof.

To continue collecting real property taxes based on valuations arrived at several years ago, in disregard of the increases in the value of real properties that have occurred since then, is not in consonance with a sound tax system. Fiscal adequacy, which is one of the characteristics of a sound tax system, requires that sources of revenues must be adequate to meet government expenditures and their variations.

Philex Mining Corp vs. CIR

Facts: The BIR sent a letter to Philex asking the latter to settle its tax liabilities. Philex protested the demand contending that it has pending claims for VAT input credit/refund for taxes it paid for the previous years. Thus, Philex wants to set-off or apply the concept of compensation in its favor. The BIR refused. The CTA, affirmed by CA, ruled against Philex stating that “taxes cannot be subject to set-off on compensation since claim for taxes is not a debt or contract.”

Issue: WON the pending claim for refund of Philex may be applied against an existing tax liability; or, WON Philex may set-off its tax liability against its pending claims for refund.

Held: Negative.

1. Taxes cannot be subject to compensation for the simple reason that the government and the taxpayer are not creditors and debtors of each other. There is a material distinction between a tax and debt. Debts are due to the Government in its corporate capacity, while taxes are due to the Government in its sovereign capacity;

2. Philex’s reliance on our holding in Commissioner of Internal Revenue v. Itogon-Suyoc Mines Inc., wherein the SC ruled that a pending refund may be set off against an existing tax liability even though the refund has not yet been approved by the Commissioner, is no longer without any support in statutory law.

It is important to note, that the premise of our ruling in the aforementioned case was anchored on Section 51 (d) of the National Revenue Code of 1939. However, when the National Internal Revenue Code of 1977 was enacted, the same provision upon which the Itogon-Suyoc pronouncement was based was omitted. Accordingly, the doctrine enunciated in Itogon-Suyoc cannot be invoked by Philex.

Gerochi, et al vs. Dept of Energy

Facts: Gerochi et al seeks the declaration of Sec. 34 of RA 9136 (Electric Power Industry Refor Act of 1991-EPIRA) which imposes a Universal Charge against all electric end-users on a monthly basis, as unconstitutional on the ground of: such universal charge is a tax, which power to impose is a strictly legislative function, thus, constitutes an undue delegation of legislative power on the part of the Energy Regulatory Commission (ERC).

Issue: Whether the universal charge is a tax; and, whether there is an undue delegation of legislative taxing power to ERC.

Held: Both negative.

1.  The conservative and pivotal distinction between power to tax and police power rests in the purpose for which the charge is made.  If generation of revenue is the primary purpose and regulation is merely incidental, the imposition is a tax; but if regulation is the primary purpose, the fact that revenue is incidentally raised does not make the imposition a tax.

It can be gleaned that the assailed Universal Charge is not a tax, but an exaction in the exercise of the State’s police power. Public welfare is surely promoted. 

Moreover, it is a well-established doctrine that the taxing power may be used as an implement of police power.

The Special Trust Fund reasonably serves and assures the attainment and perpetuity of the purposes for which the Universal Charge is imposed, i.e., to ensure the viability of the country’s electric power industry.

2. A logical corollary to the doctrine of separation of powers is the principle of non-delegation of powers, as expressed in the Latin maxim potestas delegata non delegari potest (what has been delegated cannot be delegated).

All that is required for the valid exercise of this power of subordinate legislation is that the regulation be germane to the objects and purposes of the law and that the regulation be not in contradiction to, but in conformity with, the standards prescribed by the law. These requirements are denominated as the completeness test and the sufficient standard test.

The Court finds that the EPIRA, read and appreciated in its entirety, in relation to Sec. 34 thereof, is complete in all its essential terms and conditions, and that it contains sufficient standards.

Roxas et al vs CTA

Facts: Roxas Y Cia is a partnership managing agricultural lands with a total land area of 19,000 ha (Known as the Nasugbu farmlands). The tenants therein wanted to acquire the land they till, thus the government persuaded Roxas Y Cia to sell to it some of its lands. Roxas Y Cia agreed but it turned out that the govt does not have sufficient funds to pay for such lands, hence, Roxas Y Cia took the burden of selling the lands directly to the tenants on installment basis. Because of Roxas Y Cia’s act of making profits from the purchase and sale of securities, the Commissioner of Internal Revenue demanded from it fixed tax of dealer’s securities, hence, 100% of the profits made therefrom was taxed.

Issue: WON the assessment made by the CIR is correct (of taxing 100% of the profits made from the sale of the lands to the tenants made by Roxas).

Held: Negative.

It should be borne in mind that the sale of the Nasugbu farm lands to the very farmers who tilled them for generations was not only in consonance with, but more in obedience to the request and pursuant to the policy of our Government to allocate lands to the landless.

The power of taxation is sometimes called also the power to destroy. Therefore it should be exercised with caution to minimize injury to the proprietary rights of a taxpayer. It must be exercised fairly, equally and uniformly, lest the tax collector kill the “hen that lays the golden egg”. And, in order to maintain the general public’s trust and confidence in the Government this power must be used justly and not treacherously. It does not conform with Our sense of justice in the instant case for the Government to persuade the taxpayer to lend it a helping hand and later on to penalize him for duly answering the urgent call.

In fine, Roxas y Cia. cannot be considered a real estate dealer for the sale in question. Hence, pursuant to Section 34 of the Tax Code the lands sold to the farmers are capital assets, and the gain derived from the sale thereof is capital gain, taxable only to the extent of 50%.

Phil Health Care Providers Inc vs CIR

Facts: Phil Health Care Providers is a corporationengaged in providing medical/health care programs to its members who pay annual membership fees. The CIR demanded from the corporation deficiency taxes, constituting Documentary Stamp Tax (DST) imposed upon on its health care agreements. The corporation sought the cancellation of the DST assessments, among others, contending that it is a Health Maintenance Org (HMO) and not an insurance company, thus, not liable for DST on its health care agreements. It also asserts that the assessed DST which amounts to P376 million is way beyond its net worth ofP259 million.

Issue: WON the corporation is liable for the payment of DST on its health care agreements.

Held: Negative.

As a general rule, the power to tax is an incident of sovereignty and is unlimited in its range, acknowledging in its very nature no limits, so that security against its abuse is to be found only in the responsibility of the legislature which imposes the tax on the constituency who is to pay it.So potent indeed is the power that it was once opined that “the power to tax involves the power to destroy.”

Given the realities on the ground, imposing the DST on petitioner would be highly oppressive. It is not the purpose of the government to throttle private business. On the contrary, the government ought to encourage private enterprise. The corporation, just like any concern organized for a lawful economic activity, has a right to maintain a legitimate business. As aptly held in Roxas, et al. v. CTA, et al.:

The power of taxation is sometimes called also the power to destroy. Therefore it should be exercised with caution to minimize injury to the proprietary rights of a taxpayer. It must be exercised fairly, equally and uniformly, lest the tax collector kill the “hen that lays the golden egg.”

Legitimate enterprises enjoy the constitutional protection not to be taxed out of existence. Incurring losses because of a tax imposition may be an acceptable consequence but killing the business of an entity is another matter and should not be allowed. It is counter-productive and ultimately subversive of the nation’s thrust towards a better economy which will ultimately benefit the majority of our people.

IP: Emerald Garment vs Ca; Mirpuri vs. CA

Emerald Garment vs CA

GR 100098

Facts:

HD Lee Co., a foreing corpo,  seeks the cancellation of a patent in favor of Emerald Garment Manufacturing (domiciled in the Phil) for the trademark “Stylistic Mr. Lee,” which according to HD Lee Co. closely resembled its  own trademark “Lee” and thus would cause confusion, mistake and deception to the purchasing public. The Director of Patents granted the cancellation on the ground that petitioner’s trademark was confusingly similar to private respondent’s mark because “it is the word ‘Lee’ which draws the attention of the buyer and leads him to conclude that the goods originated from the same manufacturer. It is undeniably the dominant feature of the mark. The CA affirmed.

Issue: WON the trademark “Stylistic Mr. Lee” tends to mislead or confuse the public and constitutes an infringement of the trademark “Lee.”

Held: Negative for lack of adequate proof of actual use of its trademark in the Philippines prior to Emeralds use of its own mark and for failure to establish confusing similarity between said trademarks, HD Lee Co’s action for infringement must necessarily fail.

Ratio:

Emerald’s “Stylistic Mr. Lee” is not confusingly similar to private respondent’s “LEE” trademark. Colorable imitation DOES NOT APPLY because:

1. Petitioner’s trademark is the whole “STYLISTIC MR. LEE.” Although on its label the word “LEE” is prominent, the trademark should be considered as a whole and not piecemeal. The dissimilarities between the two marks become conspicuous, noticeable and substantial enough to matter especially in the light of the following variables that must be factored in, among others:

a. Expensive and valuable items are normally bought only after deliberate, comparative and analytical investigation; and

b. The average Filipino consumer generally buys his jeans by brand.

2. “LEE” is primarily a surname. Private respondent cannot, therefore, acquire exclusive ownership over and singular use of said term.

3. After a meticulous study of the records, the SC observes that the Director of Patents and the Court of Appeals relied mainly on the registration certificates as proof of use by HD Lee Co of the trademark “LEE” which  are not sufficient.

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Colorable imitation defined: “such a close or ingenious imitation as to be calculated to deceive ordinary purchasers, or such resemblance of the infringing mark to the original as to deceive an ordinary purchaser giving such attention as a purchaser usually gives, and to cause him to purchase the one supposing it to be the other.”

Mirpuri vs. CA

GR 114508

Facts:

Barbizon Corp (foreign corp) has adopted the trademark “Barbizon.” Thus, upon finding that Mirpuri (domiciled in the Phil) seeks to register the same trademark in the Philippines, Barbizon Corp filed its opposition. Barbizon Corp alleges its trademark is qualified as well-known and is therefore protected by the Convention of Paris for the Protection of Intellectual Property which the Philippines has bound to enforce. The Director of Patents rendered a decision giving due course to the patent application of Mirpuri. The CA, however, reversed this decision.

Issue: Whether or not the Convention of Paris for the Protection of Intellectual Property affords protection to a foreign corporation against a Philippine applicant for the registration of a similar trademark.

Held: Affirmative. The Philippines and the United States of America have acceded to the WTO Agreement x x x Conformably, the State must reaffirm its commitment to the global community and take part in evolving a new international economic order at the dawn of the new millennium.

Thus, the first paragraph of Article 6bis of the Paris Convention is applicable in the instant case:

This Article governs protection of well-known trademarks. Under the first paragraph, each country of the Union bound itself to undertake to refuse or cancel the registration, and prohibit the use of a trademark which is a reproduction, imitation or translation, or any essential part of which trademark constitutes a reproduction, liable to create confusion, of a mark considered by the competent authority of the country where protection is sought, to be well-known in the country as being already the mark of a person entitled to the benefits of the Convention, and used for identical or similar goods.

It is a self-executing provision and does not require legislative enactment to give it effect in the member country. 

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Trademark in R.A. No. 8293, the Intellectual Property Code of the Philippines: defines as “any visible sign capable of distinguishing goods.” In Philippine jurisprudence, the function of a trademark is to point out distinctly the origin or ownership of the goods to which it is affixed; to secure to him, who has been instrumental in bringing into the market a superior article of merchandise, the fruit of his industry and skill; to assure the public that they are procuring the genuine article; to prevent fraud and imposition; and to protect the manufacturer against substitution and sale of an inferior and different article as his product. 

RIGHT OF REDEMPTION VS. EQUITY OF REDEMPTION

RIGHT OF REDEMPTION VS. EQUITY OF REDEMPTION

Right of Redemption is the right which is specifically granted by law to the mortgagor. Equity of Redemption, however, is merely being recognized by law as there is no law covering the same.

Equity of Redemption is the right of the defendant mortgagor to extinguish and retain ownership of the property by paying the amount fixed in the decision of the court within ninety (90) days to one hundred twenty (120) days after entry of judgment or even after the sale but prior to its confirmation. Right of Redemption, on the other hand, is the right granted to the debtor-mortgagor, his successor in interest or any judicial creditor of said debtor-mortgagor or any person having a lien in the property subsequent to its mortgagor deed of trust under which the property is sold to redeem the property within one (1) year from registration of the sheriff’s certificate of sale.

In other words, Equity of Redemption is the right to extinguish the mortgage and retain ownership of the property by paying the debt. The equity of redemption may be exercised even after the foreclosure sale provided it is made before the sale is confirmed by order of the court. Right of Redemption, however, is a right granted to a mortgagor to repurchase the property even after the confirmation of the sale and even after the registration of the certificate of sale.

IN JUDICIAL FORECLOSURE OF MORTGAGE:

General Rule: Under Rule 68 of the Rules of Court, there is no right of redemption in a judicial foreclosure of mortgage. There is only here an Equity of Redemption which is exercisable within the period stipulated in the mortgage deed and subsists after the sale and before it is confirmed by the court. This means that after the foreclosure sale but before its confirmation, the mortgagor may exercise his right to pay the proceeds of the sale and prevent the confirmation of the sale.

Exception (Here, there is Right of Redemption): When the judicial foreclosure of mortgage is in favor of a banking institution (as mortgagees), in which case they shall be given a period of “one year after the sale of the real estate”. Such period, however, has been construed to be “one year from the sate of registration of the certificate of sale in the Registry of Property”.

IN EXTRAJUDICIAL FORECLOSURE OF MORTGAGE:

The Right of Redemption exists only in extrajudicial foreclosures where there is always a right of redemption within one (1) year from the date of sale but interpreted by the Court to mean one year from the registration of the sale.

But such one (1) year period for redemption no longer applies to juridical persons (as mortgagors) whose real property has been mortgaged with a bank (mortgagee). Their right to redeem the property shall be until, but not after, the registration of the certificate of foreclosure sale with the applicable Register of Deed which in no case shall be more than three (3) months after foreclosure, whichever is earlier.

In Extrajudicial Foreclosure of Mortgage, there is no equity of redemption.

RA 6539 (Anti-Carnapping Act of 1972); On Carnapping vs. Robbery vs. Theft:

People vs Tan                       GR No. 135904 (Jan. 21, 2000)

Facts:

Tan was charged by See, his friend, for violation of RA 6539 (Anti-Carnapping Act of 1972). See alleged that he turned over the possession of a car to Tan for test driving but Tan never returned the same. After several months, See formally filed a complaint for carnapping alleging that See had withdrawn the consent initially given by him to Tan when the latter went beyond test driving and appropriated the car to his own use and benefit. The Trial Court, affirmed by the CA, ruled against Tan on the ground that Tan’s failure to return the car and his consequent appropriation thereof constituted unlawful taking – the gravamen of the crime charged. Tan asserts, however, that the CA in affirming the decision of the RTC, should not have employed as bases for his conviction the basic principles in theft.

Issue:

WON the basic principles in theft (and robbery) are applicable in the crime of carnapping penalized under RA 6539.

Held:

Yes.

There is no arguing that the anti-carnapping law is a special law, different from the crimes of robbery and theft included in the Revised Penal Code. But a careful comparison of this special law with the crimes of robbery and theft readily reveals their common features and characteristics, to wit: unlawful taking, intent to gain, and that personal property belonging to another is taken without the latter’s consent. However, the anti-carnapping law particularly deals with the theft and robbery of motor vehicles.Hence, a motor vehicle is said to have been carnapped when it has been taken, with intent to gain, without the owner’s consent, whether the taking was done with or without violence or intimidation of persons or with or without the use of force upon things. Without the anti-carnapping law, such unlawful taking of a motor vehicle would fall within the purview of either theft or robbery which was certainly the case before the enactment of said statute.

Thus, as an element common to theft, robbery and carnapping, unlawful taking — its import, intention and concept — should be considered as also common to these crimes.

It is therefore the finding of the SC that there was no unlawful taking in the case at bar. An unlawful taking takes place when the owner or juridical possessor does not give his consent to the taking; or, if the consent was given, it was vitiated. See neither withheld his consent nor withdrew the same during the seven month period the car was with Tan. At the very least, See tolerated TAN’s possession of the car. Hence, Tan cannot be convicted under RA 6539.

Case Digest Prepared by:

Mary B. Oreste

Law II-E