Tax Case Digest: Jones Lang Lasalle (Philippines), Inc. v. CIR, CTA Case No. 9590, March 12, 2020

Jones Lang Lasalle (Philippines), Inc. v. CIR
CTA Case No. 9590, March 12, 2020.

CTA Third Division
Uy, J:

Lessons Applicable: CTA Jurisdiction, Prescription, Due Process
Laws Applicable: RA 1124, as amended by RA 9282,  Section 3 (a) (1), Rule 4, under Section 228 of the NIRC of 1997, as amended, and RR No. 12-99

FACTS:

• September 3, 2009: Commissioner of Internal Revenue (CIR) issued a Letter Notice informing Jones Lang Lasalle (Philippines), Inc. (JLL) that a computerized matching on the information/data provided by 3rd-party sources against its declarations per income/VAT/percentage withholding tax returns, disclosed discrepancies for calendar year 2007.
• May 11, 2010: CIR issued Letter of Authority (LOA).  
• May 31, 2010: CIR issued an undated Notice for Informal Conference.  
• October 8, 2010: CIR issued the Preliminary Assessment Notice (PAN).
• October 19, 2011: CIR issued a FAN.
• September 19, 2016: JLL filed a letter stating that the deficiency VAT assessment for VY 2007 and Collection Letter should be cancelled.
• May 8, 2017: JLL received a Final Notice Before Seizure (FNBS) dated February 28, 2017.
• JLL filed a petition for Review (With Urgent Motion for the Issuance of an Order to Suspend the Collection of Tax)

ISSUES:
1.    W/N CTA has jurisdiction to act on the Petition for Review
2.    W/N period to assess has already prescribed.
3.    W/N due process requirements under NIRC and its regulations has been complied with.

HELD: Granted.
1.    YES. Issuance of the subject FBNS constitutes the final decision of CIR that is appealable before the CTA.

• Jurisdiction over the subject matter or nature of an action is fundamental for a court to act on a given controversy.  CTA being a court of special jurisdiction can take cognizance only of matters that are clearly within its jurisdiction.
• Based on RA 1124, as amended by RA 9282 and Section 3 (a) (1), Rule 4 of the Revised Rules of the CTA, the jurisdiction of the CTA is not limited to decisions of the CIR involving disputed assessments.  The second part thereof also includes “other matters” arising under the NIRC or other laws administered by the BIR.  
• Jurisdiction of the CTA to rule on “other matters arising under the NIRC or other laws administered by the BIR” include among others, the validity of the warrant of distraint and levy and waiver of statute of limitations.
• Moreover, the term “other matters” pertain to matters directly related to disputed assessments or refunds or internal revenue taxes, fees or other charges, penalties imposed in relation thereto.

• CIR v. Isabela Cultural Corporation (G.R. No. 135210, July 11, 2001):  FBNS which indicates that the taxpayer was being given "this LAST OPPORTUNITY" to pay; otherwise, its properties would be subjected to distraint and levy, constitutes the CIR’s final decision.

2.    NO. Section 11 of RA 1125 as amended, provides that any party adversely affected by a decision or ruling of the CIR may file an appeal with the CTA 30 days after the receipt of such decision or ruling.  Since FBNS was received on May 8, 2017, thus it has until June 7, 2017 or 30 days, to appeal and challenge its validity with the CTA.  Hence, May 15, 2017 was within the 30-day period.

3.    NO. Failure to strictly comply with the notice requirements prescribed under Section 228 of the NIRC of 1997, as amended, and RR No. 12-99 is tantamount to denial of due process.  

• If there exists sufficient basis to assess the taxpayer, the CIR or his authorized representative is mandated to issue a PAN.  Thereafter, a formal letter of demand and an assessment notice shall be issued by the CIR or his duly authorized representative.  The use of the word “shall” in these legal provisions indicates the mandatory nature of the requirements laid down therein.  Thus, it is essential for CIR to establish and prove that the requisite assessment notices were fully served to the taxpayer within the prescription period. 
• Tax assessment, due process requires that the taxpayer must actually receive the assessment.  
• If the taxpayer denies having received the assessment notices, it is incumbent upon respondent to prove by competent evidence that the assessment notices were indeed received by the taxpayer.  
• It is basic in the rule of evidence that bare allegations unsubstantiated by evidence, are not equivalent proof.  
• BIR was fully informed of the change in address in accordance to Section 11 of RR No. 12-8531.  Court notes that the new address was likewise indicated in the documents issued by the BIR in the BIR records.  Evidently, BIR had knowledge of the change of address and should have sent the PAN and FAN to its new address.  But, they were sent to the old address.  While it appears that BIR did indeed issued the assessment notices, it failed to present evidence to refute JLL’s claim that it did not receive said assessment notices.  Consequently, there was no valid service of assessment notices to petitioner. 

Case Digest: Republic of the Philippines v. Sps. Marcelino (2019)

Republic of the Philippines v. Sps. Marcelino
G.R. No. 205473, December 10, 2019
SC First Division
Caquioa, J

Lessons Applicable:  Capital Gains Tax on Expropriation
Laws Applicable: Section 6 Rule 67

FACTS:
•    RTC Order dated August 23, 2012 and Order dated January 10, 2013 directed the expropriation of a 100 sqm. Lot in Valuenzuela City covered by Transfer Certificate of Title (TCT) No. V-16548 issued in the name of Sps. Marcelino and Sps. Bunsay and orderining Department of Public Works and Highways (DPWH) to pay Sps. Bunsay consequential damages equivalent to the value of the capital gains tax (CGT) and other taxes necessary to transfer the Disputed Property in its name.
•    Department of Public Works and Highways (DPWH) filed a Motion for Partial Reconsideration (MPR) praying for the deletion of the award for just compensation representing replacement cost of improvements and equivalent value of CGT and other taxes necessary to transfer
•    RTC granted the MPR in part by excluding the replacement cost of improvements
•    DPWH filed a Petition for review on certiorari filed under Rule 45 of the Rules of Court against the Order dated August 23, 2012 and Order dated January 10, 2013

ISSUE: W/N RTC award for consequential damages should include equivalent value of CGT and other taxes necessary to transfer

HELD:  NO.  While award of consequential damages equivalent value of CGT and other taxes necessary to transfer must be struck down for being erroneous, it is just and equitable to direct Republic to shoulder such taxes to preserve the compensation awarded as a consequence of the expropriation.  Compensation, to be just, must be of such value as to fully rehabilitate the affected owner; it must be sufficient to make the affected owner whole.

•    CGT, being a tax on passive income, is imposed by National Internal Revenue Code (NIRC) on the seller as a consequence of the latter’s presumed income from the sale or exchange of real property.  However, the transfer of real property by way of expropriation is not an ordinary sale contemplated under Art. 1458 of the Civil Code.  It is akin to a “forced sale” or one which arises not from consensual agreement of the vendor and vendee, but by compulsion of law.  Unlike in an ordinary sale wherein the vendor sets and agrees on the selling price, the compensation paid to the affected owner in an expropriation proceeding comes in the form of just compensation determined by the court.  Just compensation is defined as the fair and full equivalent of the loss incurred by the affected owner.
•    Section 6 Rule 67 of the Rules of Court mandates that in no case shall xxx the owner be deprived of the actual value of his property so taken.  Since just compensation requires that real, substantial, full and ample equivalent be given for the property taken, the loss incurred by the affected owner necessarily includes all incidental costs to facilitate the transfer of the expropriated property to the expropriating authority including the CGT, other taxes and fees due on the forced sale. 

Taxation Case Digest: Association of International Shipping Lines v. Sec. of Finance (2020)

Association of International Shipping Lines v. Sec. of Finance
G.R. No. 222239, January 15, 2020
SC First Division
Lazara-Javier, J.

Lessons Applicable: Res judiciata, Petition for Declaratory Relief, Income tax and VAT on demurrage and detention fees, Interpretative and internal rule

Laws Applicable: CA 55, RA 9337, RMC 31-2008

FACTS:

• July 1, 2005: Republic Act No. 9337 (RA 9337) was enacted amending Sections 27, 28, 34, 106, 107, 108, 109, 110, 111, 112, 113, 114, 116, 117, 119, 121, 148, 151, 236, 237 and 288 of the 1997 National Internal Revenue Code, as amended. (NIRC)

• January 30, 2008: Commissioner of Internal Revenue (CIR) Lilian Hefti issued Revenue Memorandum Circular No. 31-2008 (RMC 31-2008) seeking to clarify certain provisions of the NIRC with portions, to wit:  
• Q-3: Are on-line international sea carriers subject to VAT?
• A-3:    No. On-line international sea carriers  are  not  subject  to  VAT  they  being subject to percentage tax under Title V of the Tax Code. xxx However, if these on-line international sea carriers engage in other transactions not exempt under Section 119 of the Code, they shall be liable to the twelve percent (12%) VAT on these transactions. 

 

• Q-4: Are demurrage fees collected by on-line international sea carriers due to delay by the shipper in unloading their inbound cargoes subject to tax?
• A-4: Yes, Demurrage fees, which are in the nature of rent for the use of property of the carrier in the Philippines is considered income from Philippine source and is subject to income tax under the regular rate as the other types of income of the on-line carrier. Said other line of business may likewise be subject to VAT or percentage tax applying   the   rule   on   threshold   discussed   in   the   succeeding paragraph.

 

• Q-5: Are detention fees and other charges collected by international sea carriers subject to tax?
• A-5: Detention fees and other charges relating to outbound cargoes and inbound  cargoes  are  all  considered  Philippine-sourced  income  of the international  sea  carriers  they  being  collected  for  the  use  of property  or  rendition  of  services  in  the  Philippines, and are subject to the Philippine income tax under the regular rate, and to the Value added  tax,  if  the  total  annual  receipts  from  all  the  VAT-registered activities   exceeds   one   million   five   hundred   thousand pesos (P1,500,000.00).  However, if the total annual gross receipts do not exceed one million five hundred thousand pesos, said taxpayer is liable to pay the 3% percentage tax.

• Q-14: Are sales of goods, supplies, equipment, fuel and services to persons engaged in international shipping operations subject to VAT? 
• A-14: The sale of goods, supplies, equipment, fuel and services (including leases of property) to the common carrier to be used in its international sea transport operations is zero-rated.  Provided,  that  the same is limited to goods, supplies, equipment, fuel and services pertaining   to   or   attributable   to   the   transport   of   goods   and passengers from  a  port  in  the  Philippines  directly  to  a  foreign  port  without  docking  or  stopping  at  any  other  port  in  the  Philippines  to  unload  passengers  and/or  cargoes  loaded  in  and  from  another domestic  port xxx

• Q-34: Are commission incomes received by the local shipping agents from their foreign principals subject to VAT?
• A-34: The  commission  income  or  fees  received  by  the  local  shipping agents   for   outbound   freights/fares   received   by   their   foreign principals which are on-line international sea carriers ( touching any port in the Philippines as part of their operation) shall be zero-rated pursuant to the provisions of Section 108(B)(4) of the Code.  Said provision does not require that payments of the commission income or fees for “services rendered to persons engaged in international shipping operations, including leases of property for use thereof,” be paid in acceptable foreign currency in order that such transaction may be zero-rated. On the other hand, commission income or fees received   by   the   local   shipping   agents   pertaining   to   inbound freights/fares     received     by     their     foreign     principals/on-line international sea carriers or pertaining to freights/fares received by off-line international sea carriers shall be subject to VAT at 12%.

• December 6, 2010: Petitioners Association of International Shipping Lines, Inc. (AISL), APL Co. Pte. Ltd. (APL) and Maersk-Filipinas, Inc. (Maersk) sought to nullify RMC No. 31-2008 via a petition for declaratory relief under Civil Case No. Q-09-64241 praying for the issuance of a writ of preliminary injunction enjoining then CIR and her agents from implementing, enforcing or acting pursuant to or on the basis of the challenged provisions of RMC 31-2008 and render judgment declaring these challenged provisions void.
• It alleged that RMC 31-2008 was void as it imposed regular tax rate of 30% and 12% VAT on the demurrage and detention fees collected by international shipping carriers from shippers or consignees for delay in the return of containers, on the domestic portion of services to persons engaged in international shipping operations, and on commission income received by local shipping agents from international shipping carriers or in connection with inbound shipments.

• May 18, 2012: RTC branch 98 in Civil Case No. Q-09-64241 declared as invalid the challenged provisions of RMC 31-2008 insofar as it subjects demurrage and detention fees to the regular corporate income tax under Section 28(A)(1) and 12% VAT.

•  March 7, 2013: RA 10378 was enacted amending Section 28 (A)(3)(a) of the NIRC which reads:
• Being incidental to the trade or business of the international carrier, demurrage fees should instead form part of the Gross Philippine Billings (GPB) subject to 2.5% tax under Section 28 (A)(1)(3b) of the NIRC and the same does not expressly impose 12% VAT on the domestic portion of the services rendered by international carriers.

• December 4, 2013: Petitioners initiated a petition for declaratory relief challenging Section 4.4 of RR 15-2013 (implementing rules of RA 10378) and impleading both the Secretary of Finance and CIR.
• 4.4) Taxability   of   Income   Other   Than   Income   from International Transport Services. —All items of income derived by international carriers that do not form part of Gross Philippine Billings as defined under these Regulations shall be subject to tax under the pertinent provisions of the NIRC, as amended. 

•  Demurrage fees, which are in the nature of rent for the use of property of the carrier in the Philippines, is considered income from Philippine source and is subject to income tax under the regular rate as the other types of income of the on-line carrier.
• Detention fees and other charges relating to outbound cargoes and inbound cargoes are all considered Philippine-sourced income of international sea carriers they being collected for the use of property or rendition of services in the Philippines, and are subject to the Philippine income tax under the regular rate.

• September 15, 2015: RTC dismissed the petition for declaratory relief

1.    granted the motion for judicial notice of the existence of RMC 31-2008, May 18, 2012 RTC Order in Civil Case No. Q-09-64241 and the enactment of RA 10378 – all these being official acts of different branches of government
2.    Declared that it had no jurisdiction over the petition for declaratory relief pursuant to CA 55 which removed from RTC the authority to rule on cases involving one’s liability for tax, duty, or charge collectible under any law administered by the Bureau of Customs (BOC) or BIR
3.    Ruled against res judicata because:
a.    res judicata does not give rise to a cause of action for the purpose of initiating a complaint
b.    RA 10378 constituted a supervening event which negated the application of res judicata
c.    there is no similarity of parties, subject matters, and cause of action
d.    it found RR 15-2013 to be reasonable tax regulation and an interpretative issuance, the effectivity of which does not require a public hearing nor prior registration with the UP Law Center.  

• January 8, 2016:  Petitioners’ partial motion for reconsideration was denied
•  Petitioners, on pure questions of law, sought for Supreme Court’s discretionary appellate jurisdiction to review.  They reiterated the arguments raised in their petition for declaratory relief.  

ISSUES
1.    Does res judicata apply in this case?
2.    Is a petition for declaratory relief proper for the purpose of invalidating RR 15-2013?
3.    Is RR 15-2013 a valid rule?

HELD: Denied
1.    NO. Res judicata applies in the concept of “bar by prior judgment” if the following requisites concur:
a.    Former judgment or order must be final
b.    Judgment or order must be on the merits
c.    Decision must have been rendered by a court having jurisdiction over the subject matter and the parties – not met since while RMC 31-2008 which is the subject of Civil Case No. Q-09-64241 and RR 15-2013 subject of the present case both treat demurrage and detention fees to be within the prism of regular corporate income tax rate, they emanate from different authority. Moreover, the judgment in Civil Case No. Q-09-64241 which only binds the CIR cannot serve as a judicial precedent for the purpose of precluding the Secretary of Finance from promulgating a similar issuance on the same subject.  It also cannot be judicial precedent to be followed in subsequent cases by all courts in the land as it is rendered by RTC and not SC.
d.    There must be, between the 1st and 2nd action, identity of parties of subject matter and of cause of action – not met since RTC branch 98 in Civil Case No. Q-09-64241 is only binding on herein petitioners and the CIR as lone respondent.  However, in this case, although the petitioners are the same, the respondents are the CIR and the Sec. of Finance.

• CIR issued RMC 31-2008 on January 30, 2008 under the auspices of Section 4 of the NIRC while Sec. of Finance issued RR 15-2013 on September 20, 2013 in obedience to the legislative directive under Section 5 of RA 103778 and pursuant to his rule-making power under Section 244 of the NIRC.  Both were issued pursuant to their separate powers and prerogatives granted by law.

2.    No. Since there is no actual case involved in a petition for declaratory relief, it cannot be the proper vehicle to invoke the power of judicial review to declare a state as invalid or unconstitutional. As decreed in DOTR v. PPSTA (G.R. No. 230107, July 24, 2018), the proper remedy is certiorari or prohibition. 

• Nonetheless, the court held in Diaz et al v. Secretary of Finance, et al (G.R. No. 193007, July 19, 2011): “But there are precedents for treating a petition for declaratory relief as one for prohibition if the case has far-reaching implications and raises questions that need to be resolved for the public good. The Court has also held that a petition for prohibition is a proper remedy to prohibit or nullify acts of executive officials that amount to usurpation of legislative authority. xxx Although the petition does not strictly comply with the requirements of Rule 65, the Court has ample power to waive such technical requirements when the legal questions to be resolved are of great importance to the public. The same may be said of the requirement of locus standi which is a mere procedural requisite.”

3.    Yes. RR 15-2013 is a valid interpretative and internal issuance for the guidance of all internal revenue officers and others concerned.  It merely sums up the rules by which international carriers may avail of preferential rates or exemption from income tax on their gross revenues derived from the carriage of persons and their excess baggage based on the principle of reciprocity or an applicable tax treaty or international agreement to which the Philippines is a signatory.  As such it need not pass through a public hearing or consultation, get published nor registered with UP Law Center for its effectivity. 

• In treating demurrage and detention fees as regular income subject to regular income tax rate, the Secretary of Finance relied on Section 23(A)(I)(3a) of NIRC, as amended by RA 10378, which is still in effect since not amended by Tax Reform for Acceleration and Inclusion (TRAIN) law.
• Under 55 15-2013, demurrage and detention fees are not deemed within the scope of GPB.  GPB covers gross revenue derived from transportation of passengers, cargo and/or mail originating from the Philippines up to the final destination.  Any other income, therefore, is subject to the regular income tax rate.  When the law is clear, there is no other recourse but to apply it regardless of its perceived harshness.  Dura lex sed lex.
• Exclusion of demurrage and detention fees from the preferential rate of 2.5% is proper since they are not considered income derived from transportation of persons, goods and/or mail, in accordance with the rule expressio unios est exclusion alterius.
• Demurrage and detention fees fall within the definition of “gross income” - acquired in the normal course of trade or business 
• Demurrage fees – rent payment for the vessel
• Detention fees – use of container

Corporate Law and Negotiable Instruments Law Case Digest: Llorente v. Star City Pty Ltd. (2020)

First Division
Llorente v. Star City Pty Ltd.(2020)
G.R. No. 212050/G.R. No. 212216, January 15, 2020
Caguioa, J.


Lessons Applicable: Capacity to Sue, Jurisdiction of RTC, Isolation Transaction Rule, Bank Drafts, Drawer Liability, Effect of Stop Payment Order

Laws Applicable: Sec. 150 of RA 11232, Section 84 of the NIL

FACTS:
•    Star City Pty Limited (SCPL) operates as a casino in Sydney, New South Wales, Australia and claims that it is not doing business in the Philippines and is suing for an isolated transaction. 
•    November 25, 2002: It filed a complaint for collection of sum of money with prayer for preliminary attachment against Llorente, who was a patron of its Star City casino and Equitable PCI Bank (EPCIB).
•    July 12, 2000: Llorente negotiated two (2) Equitable PCI bank drafts with check numbers 034967 and 034968 worth 150,000 USD each or for the total amount of 300,000 USD in order to play in the Premium Programme of the casino.
•    The Premium Programme offers the patron a 1% commission rebate on his turnover at the gambling table and a .10% rebate for complimentary expense
•    Before upgrading Llorente to this programme, SCPL contracted 1st EPCIB to check the status of the subject drafts    
•    After Llorente confirmed that the same were issued on clear funds without any stop payment orders, his front money account in the casino was credited with 300,000 USD
•    July 18, 2000: SCPL deposited the drafts with Tomas Cook Ltd.
•    August 1, 2000: SCPL received the advise of Bank of New York about the “Stop Payment Order” (SPO) prompting it to make several demands upon Llorente who refused to pay
•    August 30, 2000: SCPL sought settlement from EPCIB which denied it on the ground of the SPO by LLorente and no notice of dishonor was given.
•    January 28, 2003: RTC granted the issuance of writ of preliminary attachment based on the indicative acts of Llorente of his intention to avoid his obligation and defraud SCPL (i.e. leaving hotel premise without informing SPCL his whereabouts, failing to pay for services availed of, requesting SPO despite availing of services, failure to communicate for the settlement of his obligations)
•    Llorente alleged that he caused the SPO because of SCPL’s commission of fraud and unfair gaming practices during his stay in the casino from July 12 to July 17, 2000.  He also sought the dismissal of the case on the ground of lack of legal capacity to sue since the “isolated transaction rule” only covers transaction which occurred in the Philippines when the same occurred in Australia.
•    EPCIB in its answer also alleged lack of personality to sue before the Philippine courts and denied that it unjustifiably and maliciously refused to settle the obligation since it merely complied with Llorente’s instruction.  Moreover, it stated that SCPL has no action against it since there was no privity of contract between them.  It also filed a cross-claim against Llorente since it already reimbursed the face value of the subject drafts, it is relieved of all liabilities under said drafts.
•    RTC: Found SPCL to have legal capacity to sue and held Llorente (as payee of the drafts and indorser who signed on its back) and EPCIB (as drawer of the drafts) solidarily liable for the value of the drafts.
•    CA: Denied Llorante’s appeal but partially granted EPCIB’s discharhing it from any responsibility considering that it already paid Llorente
•    CA denied both Llorente’s motion for reconsideration and SCPL’s partial motion for reconsideration
•    Llorente and SCPL filed an instant Rule 45 petitions for review on certiorari

ISSUES:
1.    W/N SCPL has the capacity to sue
2.    W/N Philippine courts have jurisdiction over the case
3.    W/N EPCIB should be liable as drawer

HELD:
1.    YES.

• Sec. 150 of RA 11232 (Revised Corporation Code of the Philippines) (RCC) which became effective on February 23, 2019 (reproduction of Sec. 133 of BP 68) provides:
• SEC.  150. Doing  Business  Without  a  License.–No  foreign  corporation  transacting business  in  the  Philippines  without  a  license,  or  its  successors  or  assigns,  shall  be  permitted  to maintain or intervene in any action, suit or proceeding in any court or administrative agency of the Philippines; but such corporation may be sued or proceeded against before Philippine courts or administrative tribunals on any valid cause of action recognized under Philippine laws

• While the RCC grants to foreign corporations with Philippine license the right to sue in the Philippines, the Court, in the long line of cases under the regime of the Corporation Code has held that a foreign corporation not engaged in business in the Philippines may not be denied the right to file an action in the Philippines court for an isolated transaction. 
• The issue on whether a foreign corporation which does not have license to engage in business the Philippines can seek redress in Philippine courts depends on whether it is doing business or it merely entered into an isolated transaction – qualifying circumstance essential part of the plaintiff’s capacity to sue (as a matter of pleading and procedure) should be affirmatively pleaded  
• In the case at bar, SCPL alleged in its complaint that it is not doing business in the Philippines and is suing upon a singular and isolated transaction and appointed Jimeno, Jalandoni and Cope Law Offices as its attorney-in-fact.  The latter is irrelevant to its capacity to sue.
• Moreover, Llorente in his answer pleaded an affirmative relief for damages from SCPL by way of counterclaim – contrary to his position that plaintiff has no capacity to sue and admitted the capacity of plaintiff to be subject of judicial process.  It would be unfair to allow it to be sued and not allowing it to sue on an isolated transaction here.

2.    Yes.

• Complaint is for civil case for collection of sum of money which under BP 129 Section 19 RTCs have jurisdiction – above 400,000 in Metro Manila
• Amount demanded: 300,000 USD plus legal interest from date of 1st demand on December 20, 2000 until full payment is 

• Criminal case territorial jurisdiction involving checks: any of the places where the check is drawn, issued, delivered or dishonored has jurisdiction – subject drafts drawn by EPCIB, a Philippine bank

3.    Yes.

• CA recognized SCPL as a holder in due course and it did not overturn the finding of the RTC that the subject demand/bank drafts are negotiable instruments.  In effect, 2 demand/bank drafts drawn by EPCIB with Llorante as the payee are negotiable instruments.
• A draft is a form of a bill of exchange used mainly in transactions between persons physically remote from each other.  It is an order by 1 person, say the buyer of goods, address to a person having in possession funds of such buyer, ordering the addressee to pay the purchase price to the seller of the goods.  Where the order is made by 1 bank to another = bank drafts – negotiable instruments governed by the provisions of Negotiable Instruments Law (NIL)

•  Both RTC and CA recognized EPCIB as the drawer of the subject demand/bank drafts. 
• Sec. 61. Liability of drawer. - The drawer by drawing the instrument admits the existence of the payee and his then capacity to indorse; and engages that, on due presentment, the instrument will be accepted or paid, or both, according to its tenor, and that if it be dishonored and the necessary proceedings on dishonor be duly taken, he will pay the amount thereof to the holder or to any subsequent indorser who may be compelled to pay it. But the drawer may insert in the instrument an express stipulation negativing or limiting his own liability to the holder.
• When the bank, as the drawer of a negotiable check, signs the instrument its engagement is then as absolute and express as if it were written on the check and a dual promise is implied from the issuance of the check:

•  Bank upon which it is drawn will pay the amount thereof
• If such bank should fail to make the payment, the drawer will pay the same to the holder
• Drawing a check = drawer admits the existence of the payee and his then capacity to endorse; impliedly represents that he (payee) has funds or credits available for its payment in the bank which it is drawn; engages that if the bill is not paid by the drawee and due proceedings on dishonor are taken by the holder, he will upon demand pay the amount of the bill together with the damages and expenses accruing to the holder by reason of the dishonor of the instrument; and if the drawee refuses to accept a bill drawn upon him, becomes liable to pay the instrument according to his original undertaking
• Liability of the drawer is secondary = after acceptance – conditional upon proper presentment and notice of dishonor, and, in case of a foreign bill of exchange, protest unless such conditions are excused or dispensed with. 
• Section 84 of the NIL: When instrument is dishonored by non-payment, an immediate right of recourse to all parties secondarily liable thereon accrues to the holder, subject to the provision of the NIL

• GR: Effect of countermand or stopping of payment by the drawer - Relation between the drawer and the payee = as if the instrument had been dishonored and notice thereof given to the drawer
• drawer of a bill (including a draft or check) may by notice to the drawee prior to acceptance or payment countermand his order and command the drawee not to pay, in which case the drawee is obliged to refuse to accept or pay  Drawer’s conditional liability is changed to one free from the condition > like that of the maker of a promissory note due on demand – liable on the instrument if he has no sufficient defense

•  EX: Draft drawn by 1 bank upon another and bought and paid for by a remitter, as the equivalent of money or as an executed sale of credit by the drawer, is not subject to rescission or countermand so as to avoid the drawer’s liability thereon.
• Right to stop payment cannot be exercised so as to prejudice the rights of holders in due course without rendering the drawer liable on the instrument to such holders

1. Liability of EPCIB as the drawer cannot be abrogated by the Indemnity Agreement because bank drafts are negotiable instruments nor can it argue that it has no privity of contract.  Its secondary liability under Section 61 of the NIL became primary when the payment of the subject demand/bank drafts had been stopped which had the same effect as if the instruments had been dishonored and notice thereof was given to the drawer pursuant to Section 84 of the NIL.
2. If EPCIB is made liable on the subject demand/bank drafts, it has a recourse against the indemnity bond.  In effect, the indemnity bond required by EPCIB is in effect an admission of his liability to SCPL and Llorente’s citing exceeding his obligation to pay as reason for the SPO weakens his allegation of fraud and unfair gaming practice against SCPL.
3. Unjust enrichment cannot apply to SPCL since party who received the benefit was Llorente.  Any payment to SCPL arising from the subject demand/bank drafts by EPCIB and/or Llorente can never be by mistake.
• Art. 2154. If something is received when there is no right to demand it, and it was unduly delivered through mistake, the obligation to return it arises
• Art. 2163. It is presumed that there was a mistake in the payment if something which had never been due or had already been paid was delivered; but he from whom the return is claimed may prove that the delivery was made out of liberality or for any other just cause.

• Both Llorente and EPCIB are individually and primarily liable as endorser and drawer of the subject demand/bank drafts, repectively – SPCL may proceed to collect the damages awarded simultaneously or alternatively provided it is not more than the damages awarded
• 300,000 USD with interest at the legal rate of 12% per annum from date of extrajudicial demand against EPCIB: August 30, 2002) (that was made subsequent to the extrajudicial demand against Llorente) and 6% per annum from July 1, 2013 until full payment and the payment for attorney’s fees equivalent to 5% of the amount of demand with interest of 6% per annum from finality of Decision until full payment    

• Art. 1207. xxx There is a solidary liability only when the obligation expressly so states, or when the law or the nature of the obligation requires solidarity.
• No contract nor does NIL provide for solidary obligation under the liability of the drawer

Tax Case Digest: Filipinas Synthentic Fiber v. CA (1999)

THIRD DIVISION
Filipinas Synthentic Fiber v. CA (1999)
G.R. Nos. 118498 & 124377  October 12, 1999
PURISIMA, J.

Lessons Applicable: Apply accrual method equally for both deduction and income, estoppel applies in CTA tax disputes

Laws Applicable:

FACTS:

• Filipinas Synthetic Fiber Corp. received a letter of demand for deficiency withholding tax on interest loans, royalties and guarantee fees paid by it non-resident corporations.
• It filed a protest on the ground that: "For Philippine Internal Revenue Tax purposes, the liability to withhold is from the time of accrual or remittance citing BIR ruling No. 71-3003 and 24-71-003-154-84.  
• It then filed a Petition for Review at the CTA and CA who denied its petition that it can be paid upon remittance.

ISSUE: W/N liability to withhold tax at source on income payments to non-resident foreign corporations arises upon remittance of the amount due rather than upon accrual.

HELD: No. CA AFFIRMED in toto.

• Section 53 (c) he is held personally liable for the tax he is duty bound to withhold; whereas, the Commissioner of Internal Revenue and his deputies are not made liable to law.
• Since there was a definite clear liability and imminent certainty that it was going to earn income it should already be taxable. 
• Moreover, petitioner is estopped for he has already claimed deductions as there were incurred as a business expense in the form of interest and royalties paid.
  

Tax Case Digest: Manila Bank v. CIR (2006)

SECOND DIVISION
Manila Bank v. CIR (2006)
G.R. No. 168118 August 28, 2006
SANDOVAL-GUTIERREZ, J.

Lessons Applicable: 4-year grace period is based on the registration and commencement (not only for newly formed corporation), MCIT law encourages new business

Laws Applicable: MCIT

FACTS:

• Manila Bank, after 12 years of being prohibited to operate due to insolvency by the Monetary Board of the BSP, is granted to operate as a thrift bank.
• It paid its taxed for 1999. 
• Then, it asked the BIR whether it is entitled to the 4-year grace period before it shall be subject to MCIT.
• BIR confirmed its entitlement.
• It filed a claim for refund erroneously paid as MCIT in 1999.
• Due to inaction, it filed a Petition for Review with the CTA who denied it since it is not a new corporation and has continued its registration with the SEC and BIR.

ISSUE: W/N Manila Bank is entitled to a 4-year grace period.

HELD: Yes. GRANT the petition.

• The intent of the Congress relative to the MCIT is to grant 4-year grace period so that newly formed corporate can stabilize itself in order to obtain a stronghold in the industry.  
• Rev. Reg. No. 4-95 clearly provides that the date of commencement of the operations of a thrift bank is the date that it was registered with the SEC or the date when the certificate of authority to operate was issued by the Monetary Board of the BSP, whichever comes later.
• Rev. Reg. No. 4-98, implementing RA 8424 imposing MCIT provides for purposes of this tax, date when business operations commence is the year which the company is registered with the BIR, thus in this case only on June 23, 1999

Tax Case Digest: CIR v. Isabela Cultural Corp. (2007)

THIRD DIVISION
G.R. No. 172231 February 12, 2007
YNARES-SANTIAGO, J.

Lessons Applicable: Accrual method, burden of proof in accrual method, deductibility of ordinary and necessary trade, business, or professional expenses, all events test

Laws Applicable:

FACTS:

• BIR disallowed Isabela Cultural Corp. deductible expenses for services which were rendered in 1984 and 1985 but only billed, paid and claimed as a deduction on 1986.  
• After CA sent its demand letters, Isabela protested.
• CTA found it proper to be claimed in 1986 and affirmed by CA

ISSUE: W/N Isabela who uses accrual method can claim on 1986 only

HELD: case is remanded to the BIR for the computation of Isabela Cultural Corporation’s liability under Assessment Notice No. FAS-1-86-90-000680.

NO

• The requisites for the deductibility of ordinary and necessary trade, business, or professional expenses, like expenses paid for legal and auditing services, are: 
• (a) the expense must be ordinary and necessary; 
• (b) it must have been paid or incurred during the taxable year; - qualified by Section 45 of the National Internal Revenue Code (NIRC) which states that: "[t]he deduction provided for in this Title shall be taken for the taxable year in which ‘paid or accrued’ or ‘paid or incurred’, dependent upon the method of accounting upon the basis of which the net income is computed
• (c) it must have been paid or incurred in carrying on the trade or business of the taxpayer; and 
• (d) it must be supported by receipts, records or other pertinent papers.
• Revenue Audit Memorandum Order No. 1-2000, provides that under the accrual method of accounting, expenses not being claimed as deductions by a taxpayer in the current year when they are incurred cannot be claimed as deduction from income for the succeeding year. Thus, a taxpayer who is authorized to deduct certain expenses and other allowable deductions for the current year but failed to do so cannot deduct the same for the next year.
• The accrual method relies upon the taxpayer’s right to receive amounts or its obligation to pay them, in opposition to actual receipt or payment, which characterizes the cash method of accounting. Amounts of income accrue where the right to receive them become fixed, where there is created an enforceable liability. Similarly, liabilities are accrued when fixed and determinable in amount, without regard to indeterminacy merely of time of payment.
• The accrual of income and expense is permitted when the all-events test has been met. This test requires: (1) fixing of a right to income or liability to pay; and (2) the availability of the reasonable accurate determination of such income or liability.
• The all-events test requires the right to income or liability be fixed, and the amount of such income or liability be determined with reasonable accuracy. However, the test does not demand that the amount of income or liability be known absolutely, only that a taxpayer has at his disposal the information necessary to compute the amount with reasonable accuracy. The all-events test is satisfied where computation remains uncertain, if its basis is unchangeable; the test is satisfied where a computation may be unknown, but is not as much as unknowable, within the taxable year. The amount of liability does not have to be determined exactly; it must be determined with "reasonable accuracy." Accordingly, the term "reasonable accuracy" implies something less than an exact or completely accurate amount.
• The propriety of an accrual must be judged by the facts that a taxpayer knew, or could reasonably be expected to have known, at the closing of its books for the taxable year. 
• Accrual method of accounting presents largely a question of fact; such that the taxpayer bears the burden of proof of establishing the accrual of an item of income or deduction.
• In the instant case, the expenses for professional fees consist of expenses for legal and auditing services. The expenses for legal services pertain to the 1984 and 1985 legal and retainer fees of the law firm Bengzon Zarraga Narciso Cudala Pecson Azcuna & Bengson, and for reimbursement of the expenses of said firm in connection with ICC’s tax problems for the year 1984. As testified by the Treasurer of ICC, the firm has been its counsel since the 1960’s. - failed to prove the burden

Tax Case Digest: China Banking Corp. v. CA

China Banking Corp. v. CA
G.R. No. 125508  July 19, 2000
VITUG, J.

Lessons Applicable: Capital asset, capital loss, inventory depends on the nature of the business

Laws Applicable:

FACTS:

• Petitioner China Bank made a 53% equity investment in First CBC Capital (Asia) Ltd., a Hongkong Subsidiary of P 16,227, 851.80
• 1906: with the approval of the Bangko Sentral, it wrote of as worthless investment for being insolvent in its 1987 Income Tax Return treated as bad debts o ordinary loss deductible. 
• CIR contends it should be capital loss.  
• CTA and CA on Petition for Review on Certiorari: upheld CIR contention

ISSUE: W/N Capital loss (NOT Ordinary Loss)

HELD: Yes. Petition is DENIED

• Equity investment is a capital asset resulting in a capital gain or a capital loss. A capital asset is defined negatively in Section 33(1) of the NIRC
• (1) Capital assets. - The term 'capital assets' means property held by the taxpayer (whether or not connected with his trade or business), but does not include: 
• stock in trade of the taxpayer; or 
• other property of a kind which would properly be included in the inventory of the taxpayer if on hand at the close of the taxable year; or 
• property held by the taxpayer primarily for sale to customers in the ordinary course of his trade or business; or 
• property used in the trade or business, of a character which is subject to the allowance for depreciation provided in subsection (f) of section twenty-nine; or
• real property used in the trade or business of the taxpayer
• Thus, shares of stock; like the other securities defined in Section 20(t)[4] of the NIRC, would be ordinary assets only to a dealer in securities or a person engaged in the purchase and sale of, or an active trader (for his own account) in, securities. 
• Section 20(u) of the NIRC defines a dealer in securities thus" (u) The term 'dealer in securities' means a merchant of stocks or securities, whether an individual, partnership or corporation, with an established place of business, regularly engaged in the purchase of securities and their resale to customers; that is, one who as a merchant buys securities and sells them to customers with a view to the gains and profits that may be derived therefrom."  
• In the hands, however, of another who holds the shares of stock by way of an investment, the shares to him would be capital assets. When the shares held by such investor become worthless, the loss is deemed to be a loss from the sale or exchange of capital assets. 
• Loss sustained by the holder of the securities, which are capital assets (to him), is to be treated as a capital loss as if incurred from a sale or exchange transaction. A capital gain or a capital loss normally requires the concurrence of two conditions for it to result: (1) There is a sale or exchange; and (2) the thing sold or exchanged is a capital asset. When securities become worthless, there is strictly no sale or exchange but the law deems the loss anyway to be "a loss from the sale or exchange of capital assets
• Capital losses are allowed to be deducted only to the extent of capital gains, i.e., gains derived from the sale or exchange of capital assets, and not from any other income of the taxpayer.

Tax Case Digest: Phil. Refining Company v. CA (1996)

Phil. Refining Company v. CA
G.R. No. 118794 May 8, 1996
REGALADO, J.

Lessons Applicable: deductibility of bad debts, penalties of 25% surcharge, interest of 20, civil penalties are compensatory (not penal), civil penalties and interest are automatic

Laws Applicable:

FACTS:

• Petitioner Philippine Refining Company (PRC) was assessed by respondent Commissioner of Internal Revenue (Commissioner) to pay a deficiency tax for the year 1985 in the amount of P1,892,584
• PRC protested that the amounts are bad debts and interest expense which are allowable and legl deductions.  But, CIR ignored it and issued a warrant of garnishment against PRC's deposits at City Trust Bank.
• PRC filed a Petition for Review with the CTA who reversed the interest expense disallowance but maintained the 13 bad debts disallowance. 
• PRC elevated the case to CA who dismissed the case for failing to satisfy the requirements of worthlessness of a debt:
• (1) there is a valid and subsisting debt
• (2) debt must be actually ascertained to be worthless and uncollectible during the taxable year
• (3) debt must be charged off during the taxable year
• (4) debt must arise from the business or trade of the taxpayer
• (5) uncollectible even in the future
• (6) exerted diligent effort to collect

ISSUES:
1. W/N bad debts requirements are met to be deductible as assessed by the CA
2. W/N PRC should be liable for penalties and interests

HELD: petition at bar is DENIED
1. NO.

• Furthermore, there are steps outlined to be undertaken by the taxpayer to prove that he exerted diligent efforts to collect the debts, viz: (1) sending of statement of accounts; (2) sending of collection letters; (3) giving the account to a lawyer for collection; and (4) filing a collection case in court.
• The only evidentiary support given by PRC for its aforesaid claimed deductions was the explanation or justification posited by its financial adviser or accountant.  Not a single document was offered to show that the Remoblas Store and CM Variety Store were burned, even just a police report or an affidavit attesting to such loss by fire.  The account of Tomas Store in the amount of P16,842.79 is uncollectible, claims petitioner PRC, since the owner thereof was murdered and left no visible assets which could satisfy the debt. Withal, just like the accounts of the two other stores just mentioned, petitioner again failed to present proof of the efforts exerted to collect the debt, other than the aforestated asseverations of its financial adviser.  The accounts of Aboitiz Shipping Corporation and J. Ruiz Trucking in the amounts of P89,483.40 and P69,640.34, respectively, both of which allegedly arose from the hijacking of their cargo and for which they were given 30% rebates by PRC, are claimed to be uncollectible. Again, petitioner failed to present an iota of proof, not even a copy of the supposed policy regulation of PRC that it gives rebates to clients in case of loss arising from fortuitous events or force majeure, which rebates it now passes off as uncollectible debts. 
• Findings of the CTA having recognized expertise will not ordinarily be reviewed absent a showing of gross error or abuse on its part.

2.  YES.

• Sec. 248 and 249 of the tax code clearly provides that civil penalty is imposed in case of failure to pay the tax within the prescribed time for its payment and deficiency tax or any surcharge or interest on the due date appearing in the notice and demand of the commissioner.  Thus, penalties of 25% surcharge and interest of 20% shall accrue from April 11, 1989. 
• Tax laws imposing penalties for delinquencies, so we have long held, are intended to hasten tax payments by punishing evasions or neglect of duty in respect thereof. If penalties could be condoned for flimsy reasons, the law imposing penalties for delinquencies would be rendered nugatory, and the maintenance of the Government and its multifarious activities will be adversely affected.

Tax Case Digest: British American Tobacco v. Camacho (2008)

British American Tobacco v. Camacho (2008)
G.R. No. 163583 August 20, 2008
YNARES-SANTIAGO, J.

Lessons Applicable:  Court of Tax Appeals Jurisdiction, Regional Trial Court Jurisdiction, Equal Protection and Uniformity of Taxation (constitutional issue), BIR Power to Conduct Resurvey and Reclassification (delegated by express legislation)

Laws Applicable:

FACTS:

• June 2001, petitioner British American Tobacco introduced and sold Lucky Strike, Lucky Strike Lights and Lucky Strike Menthol Lights cigarettes w/ SRP P 9.90/pack - Initial assessed excise tax: P 8.96/pack (Sec. 145 [c])
• February 17, 2003: RR 9-2003: Periodic review every 2 years or earlier of the current net retail price of new brands and variants thereof for the purpose of the establishing and updating their  tax classification
• March 11, 2003: RMO 6-2003: Guidelines and procedures in establishing current net retail prices of new brands of cigarettes and alcohol products
• August 8, 2003: RR 22-2003: Implement the revised tax classification of certain new brands introduced in the market after January 1, 1997 based on the survey of their current net retail prices.  This increased the excise tax to P13.44 since the average net retail price is above P 10/pack.  This cause petitioner to file before the RTC of Makati a petition for injunction with prayer for issuance of a Temporary Restraining Order and/or Writ of Preliminary Injunction sought to enjoin the implementation of Sec. 145 of the NIRC, RR No. 1-97, 9-2003, 22-2003 and 6-2003 on the ground that they discriminate against new brands of cigarettes in violation of the equal protection and uniformity provisions  of the Constitution 
• RTC: Dismissed
• While petitioner's appeal was pending, RA 9334 amending Sec. 145 of the 1997 NIRC among other took effect on January 1, 2005 which in effect increased petitioners excise tax to P25/pack
• Petitioner filed a Motion to Admit attached supplement and a supplement to the petition for review assailing the constitutionality of RA 9334 and praying a downward classification of Lucky Strike products at the bracket taxable at P 8.96/pack since existing brands are still taxed based on their price as of October 1996 eventhough they are equal or higher than petitioner's product price.   
• Philip Morris Philippines Manufacturing Incorporated, Fortune Tobacco Corp., Mighty Corp. and JT International Intervened.  
• Fortune Tobacco claimed that the CTA should have the exclusive appellate jurisdiction over the decision of the BIR in tax disputes

ISSUE:

1. W/N the RTC rather than the CTA has jurisdiction.
2. W/N RA 9334 of the classification freeze provision is unconstitutional for violating the  equal protection and uniformity provisions  of the Constitution
3. W/N RR Nos. 1-97, 9-2003, 22-2003 and RA 8243 even prior to its amendment by RA 9334 can authorize the BIR to conduct resurvey and reclassification. 

HELD:
1. Yes. The jurisdiction of the CTA id defined in RA 1125 which confers on the CTA jurisdiction to resolve tax disputes in general.  BUT does NOT include cases where the constitutionality of a law or rule is challenged which is a judicial power belonging to regular courts.

2. No. In Sison Jr. v. Ancheta, the court held that "xxx It suffices then that the laws operate equally and uniformly on all persons under similar circumstances or that all persons must be treated in the same manner, the conditions not being different, both in the privileges conferred and the liabilities imposed.  If the law be looked upon in tems of burden on charges, those that fall within a class should be treated in the same fashion, whatever restrictions cast on some in the group equally binding on the rest. xxx"  Thus, classification if rational in character is allowable. In Lutz v. Araneta: "it is inherent in the power to tax that a state be free to select the subjects of taxation, and it has been repeatedly held that 'inequalities which result from a singling out of one particular class for taxation, or exemption infringe no constitutional limitation"  SC previously held: "Equality and uniformity in taxation means that all taxable articles or kinds of property of the same class shall be taxed at the same rate. The taxing power has the authority to make reasonable and natural classifications for purposes of taxation"

Under the the rational basis test, a legislative classification, to survive an equal protection challenge, must be shown to rationally further a legitimate state interest^. The classifications must be reasonable and rest upon some ground of difference having a fair and substantial relation to the object of the legislation

A legislative classification that is reasonable does not offend the constitutional guaranty of the equal protection of the laws. The classification is considered valid and reasonable provided that: (1) it rests on substantial distinctions; (2) it is germane to the purpose of the law; (3) it applies, all things being equal, to both present and future conditions; and (4) it applies equally to all those belonging to the same class.

Moreover, petitioner failed to clearly demonstrate the exact extent of such impact as the price is not the only factor that affects competition.

3. NO. Unless expressly granted to the BIR, the power to reclassify cigarette brands remains a prerogative of the legislature which cannot be usurped by the former.  These are however modified by RA 9334.

Tax Case Digest: Davao Gulf Lumber Corporation v. CIR (1998)

Davao Gulf Lumber Corporation v. CIR
G.R. No. 117359  July 23, 1998
PANGANIBAN, J

Lessons Applicable:  tax exemption should be construed strictissimi juris against the grantee, equity is not a ground for tax exemption

Laws Applicable:

FACTS:

• Davao Gulf Lumber Corporation, a licensed forest concessionaire possessing a Timber License Agreement granted by the Ministry of Natural Resources  (Now DENR), purchased from various oil companies refined and manufactured oils as well as motor and diesel fuels for its exploitation and operation.  
• Selling companies paid and passed the specific taxes imposed under Sec. 153 and 156 of the 1997 NIRC to petitioner as purchaser who in turn filed before CIR a Claim for Refund for P120, 825 representing 25% of the specific taxes actually paid based on Insular Lumber Co. v. CTA and Sec. 5 of RA 1435 and complied with its procedure.
• Then, petitioner filed before CA a Petition for Review: Favored petitioner to a partial refund P2,923 (excluding those that have prescribed) and based on the rates deemed paid under RA 1435 (NOT higher rates actually paid under the NIRC)
• Insisting that the basis be the higher rate, petitioner elevated the case to the CTA who affirmed the CA's decision

ISSUE: W/N the basis should be the higher rates prescribed by Sec. 153 and 156 of the 1997 NIRC

HELD:  NO.  A tax cannot be imposed unless it is supported by the clear and express language of a statute; On the other hand, once the tax is unquestionably imposed, a claim of exemption from tax payments must be clearly shown and based on language in the law too plain to be mistaken.  Section 5, RA 1435 as a tax exemption, must be construed strictissimi juris against the grantee.

• Supported by CIR v. CA and Atlas Co., CIR v. Rio Tuba Nickel Mining Corp.   and Insular Lumber Co. - all cases where purchases was made BEFORE 1997 NIRC is in effect.
• According to an eminent authority on taxation, there is no tax exemption solely on the ground of equity

Tax Case Digest: Mamba v. Lara (2009)

Mamba v. Lara
G.R. No. 165109               December 14, 2009
DEL CASTILLO, J.


Lessons Applicable:  locus standi, direct injury test, citizen suit

Laws Applicable:

FACTS:

• Sangguniang Panlalawigan of Cagayan passed several resolutions authorizing Governor Edgar R. Lara to negotiate, sign and execute contracts with:

1. Preferred Ventures Corp. - as financial advisor of the province of Cagayan regarding the bond floatation undertaken
2. Asset Builders Corporation - rewarded the right to plan, design, construct and develop the proposed town center
3. RCBC as trustee of the bond undertaken
4. MICO as guarantor 
5. LBP as official depositary bank of the province

• In total, the provincial will incur a total cost of  P 231, 908, 232.39 and P 187M for the 7 years of subsidizing the interest of the bonds from which the construction will be primarily sourced
• Petitioners Manuel N. Mamba, Representative of the 3rd Congressional District of the Province of Cagayan and Raymund P. Guzman and Leonides N. Fausto, both members of the Sangguniang Panlalawigan of Cagayan filed a Petition for Annulment of Contracts or Injunction with prayer for Temporary Restraining Order against Edgar R. Lara, Jenerwin C. Bacuyag et al, as members of the Sangguniang Panlalawigan of Cagayan and other contracting parties as indispenable and necessary parties.
•  Respondent filed their Answers and Motion to Dismiss stating as one of the grounds that petition lack locus standi in court.
• RTC: dismissed the petition for Lack of Cause of Action or locus standi due to failure of the petitioners to show that their rights were prejudiced.  -  sustained even on petitioner's Motion for Reconsideration

ISSUE: Whether or not petitioners have locus standi

HELD: YES.   A taxpayer is allowed to sue whether there is a claim that public funds are illegally disbursed or that the public money is being deflected to any improper purpose, or that there is wastage of public funds through the enforcement of an invalid or unconstitutional law.

• 2 requisites must be met: 
• (1) public funds derived from taxation are disbursed by a political subdivision or instrumentality and in doing so, a law is violated or some irregularity is committed - Records show an appropriation of P25 M for the interest of the bond
• (2) the petitioner is directly affected by the alleged act - the court has relaxed the stringent direct injury test bearing in mind that locus standi is a procedural technicality. By invoking transcendental importance, paramount public interest, or far-reaching implications, ordinary citizens and taxpayers were allowed to sue even if they failed to show direct injury.  In cases where serious legal issues were raised or where public expenditures of millions of pesos were involved, the court did not hesitate to give standing to taxpayers

• Another point to consider is that local government units now possess more powers, authority and resources at their disposal, which in the hands of unscrupulous officials may be abused and misused to the detriment of the public. To protect the interest of the people and to prevent taxes from being squandered or wasted under the guise of government projects, a liberal approach must therefore be adopted in determining locus standi in public suits.
  

Credit Transactions Case Digest: Spouses Gironella v. PNB (2015)

Spouses Gironella v. PNB
G.R. No. 194515. Sept. 16, 2015.
Perez J.

FACTS:
On November 11, 1991 and January 16, 1992, the Spouses Oscar and Gina Gironella obtained two co-terminus loans amounting to 7,500,000 php and 2,000,000 php from Philippine National Bank (PNB) for the construction of the Dagupan Village Hotel and Sports Complex.  Both loans were payable on installment and secured by the same real estate mortgage over a parcel of land covered by TCT No. 56059 in favor of PNB.
In May 1992, the Spouses Gironella applied for another loan amounting to 5,800,000 php for the construction of a disco-restaurant and bar and the purchase of a generator set.
From the period of February 1993 to October 2, 1995, the Spouses Gironella paid 4,219,000 php in total for their first two loans.
The Spouses Gironella defaulted in paying the prior two loans.  The Spouses alleged that: (1) they were made to believe by PNB that their third loan would be approved, (2) they were directed to proceed with their expansion plans and (3) there would be a loan restructuring.  Thus, they the income generated by the hotel while the third was pending.
In January and April 1998, the Spouses Gironella paid a total of 2,650,000 php allegedly to effect the restructuring of their loans.  Despite restructuring negotiations, PNB filed a petition to foreclose the mortgaged property on May 29, 1996 and April 17, 1998 and a Notice of Extra-judicial Foreclosure Sale.   The final foreclosure was subsequently stalled but was refiled on July 25, 2000 after failure to agree on the restructuring. 
Spouses Gironella filed a complaint before the RTC with prayer for issuance of a Temporary Restraining Order (TRO) and preliminary injunction to enjoin the enforcement of the original credit agreements and the foreclosure of the mortgaged property.  The RTC issued the TRO and Writ of Preliminary injunction and subsequently, grant the complaint by ruling that there was a binding credit restructuring agreement.  On Motion for Partial Reconsideration, RTC clarified that actual and compensatory damages to reckon from the date of the filing of the amended complaint and declared permanent the writ of preliminary injunction.
PNB filed a petition an appeal to the CA arguing that the letters sent on January 2000 and February 7, 2000 were not perfected since there was only a qualified acceptance equivalent to a counter-offer.  CA favored PNB.  The bare allegations of abuse of right by PNB on giving the Spouses Gironella false hope was insufficient to grant them damages.
Spouses Gironella filed a petition for review under Rule 45 of the Rules of Court.

ISSUE: W/N CA is correct that there is no acceptance to perfect the credit restructuring agreement.

HELD: YES. No restructured loan agreement at all that was perfected. Petition is Denied.
There are 3 distinct stages of a contract: (1) preparation or negotiation (2) perfection and (3) consummation.  The credit restructuring loan was in the negotiation stage.  The application for additional loan separate from the first two credit loans was also in the negotiation stage.
The approval of the additional loan is not contingent on the representation of the PNB officers as PNB must comply with the General Banking Law to assess based on specific legal banking requirements.  Thus, it cannot be approved without qualification.
A contract is perfected by mere consent.  In turn, consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract.  The offer must be certain and the acceptance seasonable and absolute.  If qualified, the acceptance would merely constitute a counter-offer as what occurred in this case.
To reach that moment of perfection, the parties must agree on the same thing in the same sense, so that their minds meet as to all the terms. They must have a distinct intention common to both and without doubt or difference; until all understand alike, there can be no assent, and therefore no contract. The minds of parties must meet at every point; nothing can be left open for further arrangement. So long as there is any uncertainty or indefiniteness, or future negotiations or considerations to be had between the parties, there is not a completed contract, and in fact, there is no contract at all.
The Spouses Gironella's payments under its original loan account cannot be considered as partial execution of the proposed restructuring loan agreement.  Negotiation begins from the time the prospective contracting parties manifest their interest in the contract and ends at the moment of agreement of the parties.
Once there is concurrence of the offer and acceptance of the object and cause, the stage of negotiation is finished.  Since there was a counter-offer, the parties were not past the stage of negotiation.

Human Rights Law Case Digest: Kurodo v. Jandaloni (1949)

G.R. No. L-2662             March 26, 1949

Lessons Applicable: Generally accepted principles of international law

Laws Applicable:

FACTS:

• Shigenori Kuroda, formerly a Lieutenant-General of the Japanese Imperial Army and Commanding General of the Japanese Imperial Forces in The Philippines during a period covering 1943 and 1944 who is now charged before a military Commission convened by the Chief of Staff of the Armed forces of the Philippines with having unlawfully disregarded and failed "to discharge his duties as such command, permitting them to commit brutal atrocities and other high crimes against noncombatant civilians and prisoners of the Imperial Japanese Forces in violation of the laws and customs of war"
• File a petition seeking to establish the illegality of Executive Order No. 68 of the President of the Philippines: 
• to enjoin and prohibit Melville S. Hussey and Robert Port from participating in the prosecution of his case; and  - not attorneys authorized by the Supreme Court to practice law in the Philippines is a diminution of our personality as an independent state and their appointment as prosecutor are a violation of our Constitution for the reason that they are not qualified to practice law in the Philippines and not interested party in the case
• to permanently prohibit respondents from proceeding with the case - Executive Order No. 68 is illegal on the ground that it violates not only the provision of our constitutional law but also our local laws to say nothing of the fact (that) the Philippines is not a signatory nor an adherent to the Hague Convention on Rules and Regulations covering Land Warfare and therefore petitioners is charged of 'crimes' not based on law, national and international

ISSUE: W/N  Executive Order No. 68 is valid

HELD: YES 

• President as Commander in Chief is fully empowered to consummate this unfinished aspect of war namely the trial and punishment of war criminal through the issuance and enforcement of Executive Order No. 68
• Such rule and principles therefore form part of the law of our nation even if the Philippines was not a signatory to the conventions embodying them for our Constitution has been deliberately general and extensive in its scope and is not confined to the recognition of rule and principle of international law as continued inn treaties to which our government may have been or shall be a signatory.
• It cannot be denied that the rules and regulation of the Hague and Geneva conventions form, part of and are wholly based on the generally accepted principals of international law.
• when the crimes charged against petitioner were allegedly committed the Philippines was under the sovereignty of United States and thus we were equally bound together with the United States and with Japan to the right and obligation contained in the treaties between the belligerent countries 
• the appointment of the 2 American attorneys is not violative of our nation sovereignty. It is only fair and proper that United States, which has submitted the vindication of crimes against her government and her people to a tribunal of our nation should be allowed representation in the trial of those very crimes

Human Rights Law Case Digest: Opposa v. Factoran (1993)

G.R. No. 101083 July 30, 1993

Lessons Applicable:  right of Filipinos to a balanced and healthful ecology ,inter-generational responsibility, inter-generational justice

Laws Applicable:

FACTS:

• Petitioners Minors duly represented and joined by their respective parents  against original defendant Fulgencio S. Factoran, Jr., [Secretary of the Department of Environment and Natural Resources (DENR)] which he holds in trust for the benefit of plaintiff minors and succeeding generations
• petition to prevent the misappropriation or impairment" of Philippine rainforests and "arrest the unabated hemorrhage of the country's vital life support systems and continued rape of Mother Earth - granted timber license agreements ('TLA's') to various corporations to cut the aggregate area of 3.89 million hectares for commercial logging purposes thus, at the present rate of deforestation, i.e. about 200,000 hectares per annum or 25 hectares per hour,  the Philippines will be bereft of forest resources after the end of this ensuing decade, if not earlier.
• clear and constitutional right to a balanced and healthful ecology and are entitled to protection by the State in its capacity as the parens patriae
• Philippine Environmental Policy which, in pertinent part, states that it is the policy of the State:  (a) to create, develop, maintain and improve conditions under which man and nature can thrive in productive and enjoyable harmony with each other;(b) to fulfill the social, economic and other requirements of present and future generations of Filipinos and;
  (c) to ensure the attainment of an environmental quality that is conductive to a life of dignity and well-being. (P.D. 1151, 6 June 1977)
   
• Constitutional policy of the State to:     a. effect "a more equitable distribution of opportunities, income and wealth" and "make full and efficient use of natural resources (sic)." (Section 1, Article XII of the Constitution);
      b. "protect the nation's marine wealth." (Section 2, ibid);
      c. "conserve and promote the nation's cultural heritage and resources (sic)" (Section 14, Article XIV, id.);
      d. "protect and advance the right of the people to a balanced and healthful ecology in accord with the rhythm and harmony of nature." (Section 16, Article II, id.)
•  Secretary Factoran, Jr., filed a Motion to Dismiss the complaint based on 2 grounds, namely: (1) the plaintiffs have no cause of action against him and (2) the issue raised by the plaintiffs is a political question which properly pertains to the legislative or executive branches of Government - granted further ruling that the granting of the relief prayed for would result in the impairment of contracts which is prohibited by the fundamental law of the land.
• Special civil action for certiorari under Rule 65 to set aside dismissal order

•   ISSUE: 

• 1. whether or not the minors have locus standi - yes
• 2. W/N the TLA should be cancelled

• HELD:Petition is granted
• 2.   Yes. While the right to a balanced and healthful ecology is to be found under the Declaration of Principles and State Policies (NOT Bill of Rights), it does not follow that it is less important than any of the civil and political rights enumerated in the latter. 
• Such a right belongs to a different category of rights altogether for it concerns nothing less than self-preservation and self-perpetuation-the advancement of which may even be said to predate all governments and constitutions. 
• As a matter of fact, these basic rights need NOT even be written in the Constitution for they are assumed to exist from the inception of humankind.
• Explicitly mentioned in the fundamental charter because of the well-founded fear of its framers that unless the rights to a balanced and healthful ecology and to health are mandated as state policies by the Constitution itself, thereby highlighting their continuing importance and imposing upon the state a solemn obligation to preserve the first and protect and advance the second, the day would not be too far when all else would be lost not only for the present generation, but also for those to come.
• The right to a balanced and healthful ecology carries with it the correlative duty to refrain from impairing the environment.
• even before the ratification of the 1987 Constitution, specific statutes already paid special attention to the "environmental right" of the present and future generations [June 1977: P.D. No. 1151 (Philippine Environmental Policy) and P.D. No. 1152 (Philippine Environment Code)]
• Both E.O. NO. 192 and the Administrative Code of 1987 have set the objectives which will serve as the bases for policy formulation, and have defined the powers and functions of the DENR.

• the non-impairment clause must yield to the police power of the state
• all licenses may thus be revoked or rescinded by executive action. It is not a contract, property or a property right protested by the due process clause of the Constitution.
• A timber license is an instrument by which the State regulates the utilization and disposition of forest resources to the end that public welfare is promoted. A timber license is not a contract within the purview of the due process clause; it is only a license or privilege, which can be validly withdrawn whenever dictated by public interest or public welfare as in this case
• the constitutional guaranty of non-impairment of obligations of contract is limited by the exercise of the police power of the State, in the interest of public health, safety, moral and general welfare
• Equally fundamental with the private right is that of the public to regulate it in the common interest.
• With respect to renewal, the holder is NOT entitled to it as a matter of right.
   

Crim Pro Case Digest: Mijares v. Ranada (2005)

G.R. No. 139325             April 12, 2005

Lessons Applicable: In all civil actions in which the subject of the litigation is incapable of pecuniary estimation

Laws Applicable:

FACTS:

• May 9 1991: a complaint was filed by ten Filipino citizens representing a class of 10,000 members who each alleged having suffered human rights abuses such as arbitrary detention, torture and rape in the hands of police or military forces during the Marcos regime with the United States District Court (US District Court), District of Hawaii, against the Estate of former Philippine President Ferdinand E. Marcos (Marcos Estate)
• US District Court and Affirmed by US CA: awarded them $1,964,005,859.90
• Petitioners filed Complaint with Makati RTC for the enforcement of the Final Judgment
• Marcos Estate filed a motion to dismiss, raising, among others, the non-payment of the correct filing fees paying only P410
• Petitioners claimed that an action for the enforcement of a foreign judgment is not capable of pecuniary estimation
•  RTC: estimated the proper amount of filing fees was approximately P472 and dismissing the case without prejudice
•  Petition for Certiorari under Rule 65
   

ISSUE: W/N the enforcement of a foreign judgment is incapable of pecuniary estimation

HELD: NO. (But belongs to "other actions not involving property") petition is GRANTED.

• There is an evident distinction between a foreign judgment in an action in rem and one in personam. For an action in rem, the foreign judgment is deemed conclusive upon the title to the thing, while in an action in personam, the foreign judgment is presumptive, and not conclusive, of a right as between the parties and their successors in interest by a subsequent title
• However, in both cases, the foreign judgment is susceptible to impeachment in our local courts on the grounds of want of jurisdiction or notice to the party, collusion, fraud, or clear mistake of law or fact. Thus, the party aggrieved by the foreign judgment is entitled to defend against the enforcement of such decision in the local forum. It is essential that there should be an opportunity to challenge the foreign judgment, in order for the court in this jurisdiction to properly determine its efficacy even if such judgment has conclusive effect as in the case of in rem actions, if only for the purpose of allowing the losing party an opportunity to challenge the foreign judgment. Consequently, the party attacking a foreign judgment has the burden of overcoming the presumption of its validity.  Absent perhaps a statutory grant of jurisdiction to a quasi-judicial body, the claim for enforcement of judgment must be brought before the regular courts.
• There are distinctions, nuanced but discernible, between the cause of action arising from the enforcement of a foreign judgment, and that arising from the facts or allegations that occasioned the foreign judgment.  They may pertain to the same set of facts, but there is an essential difference in the right-duty correlatives that are sought to be vindicated. Extensive litigation is thus conducted on the facts, and from there the right to and amount of damages are assessed. On the other hand, in an action to enforce a foreign judgment, the matter left for proof is the foreign judgment itself, and not the facts from which it prescinds.
• As stated in Section 48, Rule 39, the actionable issues are generally restricted to a review of jurisdiction of the foreign court, the service of personal notice, collusion, fraud, or mistake of fact or law.  The limitations on review is in consonance with a strong and pervasive policy in all legal systems to limit repetitive litigation on claims and issues. Otherwise known as the policy of preclusion, it seeks to protect party expectations resulting from previous litigation, to safeguard against the harassment of defendants, to insure that the task of courts not be increased by never-ending litigation of the same disputes, and in a larger sense to promote what Lord Coke in the Ferrer's Case of 1599 stated to be the goal of all law: "rest and quietness." If every judgment of a foreign court were reviewable on the merits, the plaintiff would be forced back on his/her original cause of action, rendering immaterial the previously concluded litigation.
• Marcos Estate cites Singsong v. Isabela Sawmill and Raymundo v. Court of Appeals:
• In determining whether an action is one the subject matter of which is not capable of pecuniary estimation this Court has adopted the criterion of first ascertaining the nature of the principal action or remedy sought.  If it is primarily for the recovery of a sum of money, the claim is considered capable of pecuniary estimation, and whether jurisdiction is in the municipal courts or in the courts of first instance would depend on the amount of the claim.  However, where the basic issue is something other than the right to recover a sum of money, where the money claim is purely incidental to, or a consequence of, the principal relief sought, this Court has considered such actions as cases where the subject of the litigation may not be estimated in terms of money, and are cognizable exclusively by courts of first instance (now Regional Trial Courts).
• An examination of Section 19(6), B.P. 129 reveals that the instant complaint for enforcement of a foreign judgment, even if capable of pecuniary estimation, would fall under the jurisdiction of the Regional Trial Courts
• The complaint to enforce the US District Court judgment is one capable of pecuniary estimation. But at the same time, it is also an action based on judgment against an estate, thus placing it beyond the ambit of Section 7(a) of Rule 141. It is covered by Section 7(b)(3), involving as it does, "other actions not involving property."  The petitioners thus paid the correct amount of filing fees, and it was a grave abuse of discretion for respondent judge to have applied instead a clearly inapplicable rule and dismissed the complaint.

Crim Pro Case Digest: Merida Waterworks District v. Bacarro (2008)

G.R. No. 165993 September 30, 2008

Lessons Applicable: Doctrine of Primary Jurisdiction, Doctrine of exhaustion

Laws Applicable:

FACTS:

• Merida Water District, a government-owned and controlled corporation4 that operates the water utility services in the municipality of Merida, Leyte conducted a public hearing for the purpose of increasing the water rate
• March 7, 2002: Merida Water District received a letter from the Local Water Utilities Administration (LWUA) that on March 5, 2002, the LWUA Board of Trustees, per Board Resolution No. 63, series of 2002, confirmed Merida Water District’s proposed water rates.
• September 3, 2002: Merida implemented a water rate increase of P90 for the first ten cubic meters of water consumption.
• February 13, 2003: consumers of Merida Water District, filed a Petition for Injunction, etc. because the rates are contrary to the rate increase agreed upon during the public hearing
• Merida filed a motion to dismiss (then later motion for reconsideration) with the RTC due to failure to exhaust administrative remedies under Presidential Decree (P.D.) No. 198, the Provincial Water Utilities Act of 1973, as amended by P.D. Nos. 768 and 1479 - denied
• Petition for Review on Certiorari with the CA (then later motion for reconsideration) - denied
• Petition for Review on Certiorari with the SC

ISSUE: W/N there is lack of jurisdiction with the RTC since the primary jurisdiction should belong to the NWRB under P.D. No. 1067.  (The NWRB does not exercise exclusive jurisdiction)

HELD: YES.  petition is GRANTED

• petitioners failed to cite any law which impliedly grants the NWRB original and exclusive jurisdiction to resolve a dispute regarding the increase of water rates. A grant of exclusive jurisdiction cannot be implied from the language of a statute in the absence of a clear legislative intent to that effect. An administrative agency with quasi-judicial power is a tribunal of limited jurisdiction, and its jurisdiction should be interpreted in strictissimi juris."
• The doctrine of exhaustion does not apply when jurisdiction is exclusive. An administrative agency’s exclusive jurisdiction over a certain dispute renders the courts without jurisdiction to adjudicate the same at that stage. The doctrine of exhaustion applies "where a claim is cognizable in the first instance by an administrative agency alone; judicial intervention is withheld until the administrative process has run its course. To cite Abe-Abe v. Manta as the authority to support the allegation that the NWRB has original and exclusive jurisdiction over a dispute regarding a water rate increase is a strained construction of this Court’s pronouncements. Thus, petitioners’ contention that the RTC has no jurisdiction because the NWRB has original and exclusive jurisdiction over a dispute concerning the increase of water rates is clearly without merit.
• One of the reasons for the doctrine of exhaustion is the separation of powers, which enjoins upon the Judiciary a becoming policy of non-interference with matters coming primarily (albeit not exclusively) within the competence of the other departments. The theory is that the administrative authorities are in a better position to resolve questions addressed to their particular expertise and that errors committed by subordinates in their resolution may be rectified by their superiors if given a chance to do so… It may be added that strict enforcement of the rule could also relieve the courts of a considerable number of avoidable cases which otherwise would burden their heavily loaded dockets.  
• Although the doctrine of exhaustion does not preclude in all cases a party from seeking judicial relief, cases where its observance has been disregarded require a strong showing of the inadequacy of the prescribed procedure and of impending harm.  Respondents justify their failure to observe the administrative process on the following exceptions to the doctrine of exhaustion of administrative remedies: (1) patent illegality; and (2) a denial of due process. However, respondents fail to show that the instant case merits the application of these exceptions.
• Jurisprudence affirming the failure to observe the doctrine of exhaustion due to a denial of due process involves instances when the party seeking outright judicial intervention was denied the opportunity to be heard.  Here, respondents admit that Merida Water District conducted a public hearing. . The existence of a hearing for this purpose renders the allegation of a denial of due process without merit.  The failure of the respondents to show that the instant case falls within the exceptions to the doctrine of exhaustion necessitates in the due observance of exhausting the proper administrative remedies before seeking judicial intervention.

Crim Pro Case Digest: Simon v. Chua G.R. No. 157547 February 23, 2011

G.R. No. 157547   February 23, 2011

Lessons Applicable: Procedural laws may be given retroactive effect to actions pending and undetermined at the time of their passage. There are no vested rights in the rules of procedure.

Laws Applicable:

FACTS:

• December 1996: Eduard Simon issued a check to Elvin Chan a Landbank Check dated December 26, 1996 worth P336,000.00
• December 26, 1996: It was dishonored due to account closed.
• After a formal demand, Simon filed for preliminary attachmen - MeTC in Pasay City issued a writ of preliminary attachment
• Simon filed a motion to dismiss on the ground of litis pendentia because there is already a charge of violation of Batas Pambansa Blg. 22 - granted by the MeTC
•  Chan appealed to the CA - reversed and set aside the decision of the MeTC

ISSUE: W/N the case should be dismissed due to litis pendentia because the Revised Rules on Criminal Procedure pertaining to independent civil actions which became effective on December 1, 2000 are applicable to this case renders Chan's civil action to recover as an independent civil action

HELD: YES.  Reversa CA and reinstate MeTC

• Procedural laws may be given retroactive effect to actions pending and undetermined at the time of their passage. There are no vested rights in the rules of procedure. xxx
• Surely, it could not have been the intendment of the framers of Batas Pambansa Blg. 22 to leave the offended private party defrauded and empty-handed by excluding the civil liability of the offender, giving her only the remedy, which in many cases results in a Pyrrhic victory, of having to file a separate civil suit. To do so may leave the offended party unable to recover even the face value of the check due her, thereby unjustly enriching the errant drawer at the expense of the payee.  The protection which the law seeks to provide would, therefore, be brought to naught. However, there is no independent civil action to recover the value of a bouncing check issued in contravention of BP 22.  Applying Rule 111 of the Rules of Court, effective December 1, 200 that  the criminal action for violation of Batas Pambansa Blg. 22 shall be deemed to include the corresponding civil action. No reservation to file such civil action separately shall be allowed
• DMPI Employees Credit Association v. Velez (different facts): issuance of a bouncing check may result in two separate and distinct crimes of estafa and violation of BP 22, the procedures for the recovery of the civil liabilities arising from these two distinct crimes are different and non-interchangeable
• In prosecutions of estafa, the offended party may opt to reserve his right to file a separate civil action, or may institute an independent action based on fraud pursuant to Article 33 of the Civil Code
• In prosecutions of violations of BP 22, however, the Court has adopted a policy to prohibit the reservation or institution of a separate civil action to claim the civil liability arising from the issuance of the bouncing check
  

Human Rights Law Case Digest: Stonehill v. Diokno (1967)

G.R. No. L-19550             June 19, 1967

Lessons Applicable: Right against warrantless searches and seizures

Laws Applicable: bill of rights

FACTS:

• In violation of Central Bank Laws, Tariff and Customs Laws, Internal Revenue (Code) and the Revised Penal Code, 42 warrants were issued against petitioners or the corporation where they are officers to search the persons above-named and/or the premises of their offices, warehouses and/or residences, and to seize and take possession of their books of accounts, financial records, vouchers, correspondence, receipts, ledgers, journals, portfolios, credit journals, typewriters, and other documents and/or papers showing all business transactions including disbursements receipts, balance sheets and profit and loss statements and Bobbins (cigarette wrappers) which are the subject of the offense.
• Petitioners filed with the Supreme Court this original action for certiorari, prohibition, mandamus and injunction, and prayed that, pending final disposition of the present case, a writ of preliminary injunction be issued alleging the search warrants to be void since (1) they do not describe with particularity the documents, books and things to be seized; (2) cash money, not mentioned in the warrants, were actually seized; (3) the warrants were issued to fish evidence against the aforementioned petitioners in deportation cases filed against them; (4) the searches and seizures were made in an illegal manner; and (5) the documents, papers and cash money seized were not delivered to the courts that issued the warrants, to be disposed of in accordance with law 

ISSUE: W/N the seizure is valid

HELD: YES. warrants for the search of 3 residences null and void; searches and seizures made are illegal; that the writ of preliminary injunction issued

• the documents, papers, and things seized under the alleged authority of the warrants in question may be split into two (2) major groups, namely: 
• (a) those found and seized in the offices of the aforementioned corporations, and 
• have no cause of action to assail the legality of the contested warrants and of the seizures made in pursuance thereof, for the simple reason that said corporations have their respective personalities, separate and distinct from the personality of herein petitioners, regardless of the amount of shares of stock or of the interest of each of them in said corporations, and whatever the offices they hold therein may be.
• question of the lawfulness of a seizure can be raised only by one whose rights have been invaded. Certainly, such a seizure, if unlawful, could not affect the constitutional rights of defendants whose property had not been seized or the privacy of whose homes had not been disturbed
• (b) those found and seized in the residences of petitioners herein.

•  2 points must be stressed in connection with this constitutional mandate, namely: 
• (1) that no warrant shall issue but upon probable cause, to be determined by the judge in the manner set forth in said provision; and - not met
• (2) that the warrant shall particularly describe the things to be seized. - not met
• without reference to any determinate provision of said laws 
• the warrants authorized the search for and seizure of records pertaining to all business transactions of petitioners herein, regardless of whether the transactions were legal or illegal.
• To uphold the validity of the warrants in question would be to wipe out completely one of the most fundamental rights guaranteed in our Constitution, for it would place the sanctity of the domicile and the privacy of communication and correspondence at the mercy of the whims caprice or passion of peace officers.