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2011 Jan 10
G.R. No. 180452
1st Division

D E C I S I O N

VELASCO, JR., J.:

The Case

This is an appeal from the January 16, 2007 Decision of the Court of Appeals (CA) in CA-G.R. CR-H.C. No. 00485 entitled People of the Philippines v. Ng Yik Bun, Kwok Wai Cheng, Chang Chaun Shi, Chua Shilou Hwan, Kan Shun Min and Raymond S. Tan, which affirmed the April 1, 2004 Decision in Criminal Case No. Q-01-99437 of the Regional Trial Court (RTC), Branch 103 in Quezon City. The RTC found accused-appellants guilty beyond reasonable doubt of violating Section 16, Article III of Republic Act No. (RA) 6425 or the Dangerous Drugs Act of 1972.

The Facts

An Information indicted accused-appellants of the following:

That on or about the 24th day of August 2000, at Barangay Bignay II, Municipality of Sariaya, Province of Quezon, Philippines, and within the jurisdiction of this Honorable Court, the above-named accused, conspiring and confederating together and mutually helping one another, did then and there knowingly, willfully, unlawfully and feloniously transport, deliver and distribute, without authority of law, on board an L-300 Mitsubishi van, bearing Plate No. UBU 827, and have in their possession, custody, and control, without the corresponding license or prescription, twenty-five (25) heat-sealed transparent plastic bags containing Methamphetamine Hydrochloride (shabu), a regulated drug, each containing: 2.954 grams, 2.901 grams, 2.926 grams, 2.820 grams, 2.977 grams, 2.568 grams, 2.870 grams, 2.941 grams, 2.903 grams, 2.991 grams, 2.924 grams, 2.872 grams, 2.958 grams, 2.972 grams, 2.837 grams, 2.908 grams, 2.929 grams, 2.932 grams, 2.899 grams, 2.933 grams, 2.938 grams, 2.943 grams, 2.955 grams, 2.938 grams and 2.918 grams, respectively, with a total weight of 72.707 kilos, and one hundred forty seven (147) self-sealing transparent plastic bags likewise containing Methamphetamine Hydrochloride (shabu), also a regulated drug, with a total weight of 291.350 kilos, or with a grand total weight of 364.057 kilos.

That the above acts were committed by a syndicate with the use of two (2) motor vehicles, namely: L-300 Mitsubishi Van bearing Plate No. UBU 827 and a Nissan Sentra Exalta car without Plate Number.

Contrary to law.[1]

As summarized in the appealed CA decision, the facts are as follows:

On August 24, 2000, at around 9:00 p.m., Capt. Danilo Ibon of Task Force Aduana received information from an operative that there was an ongoing shipment of contraband in Barangay Bignay II, Sariaya, Quezon Province. Upon instructions from his superior, Major Carlo Magno Tabo, Capt. Ibon formed a team in coordination with a Philippine National Police detachment, and, along with the operative, the team then proceeded to Villa Vicenta Resort in Barangay Bignay II, Sariaya.

The members of the team were able to observe the goings-on at the resort from a distance of around 50 meters. They spotted six Chinese-looking men loading bags containing a white substance into a white van. Having been noticed, Capt. Ibon identified his team and asked accused-appellant Chua Shilou Hwan (Hwan) what they were loading on the van. Hwan replied that it was shabu and pointed, when probed further, to accused-appellant Raymond Tan as the leader. A total of 172 bags of suspected shabu were then confiscated. Bundles of noodles (bihon) were also found on the premises.

A laboratory report prepared later by Police Inspector Mary Jean Geronimo on samples of the 172 confiscated bags showed the white substance to be shabu.

On January 10, 2001, an Amended Information for violation of Sec. 16, Article III of RA 6425 was filed against accused-appellants, who entered a plea of not guilty upon re-arraignment.

Accused-appellants all maintained their innocence and presented the following defenses:

(1) Accused-appellant Hwan testified that he was planning to buy cheap goods at Villa Vicenta Resort on August 24, 2000, when he saw a van full of bihon at the resort and inquired if it was for sale. He went to relieve himself 15 meters away from the van. A group of police officers arrested him upon his return.

(2) Accused-appellant Tan testified that he was a businessman collecting a debt in Lucena City on August 24, 2000. He was at a restaurant with his driver when three persons identified themselves as police officers and forcibly brought him inside a car. He was handcuffed, blindfolded, and badly beaten. He was later brought to a beach and was ordered to hold some bags while being photographed with five Chinese-looking men he saw for the first time. A tricycle driver, Ricky Pineda, corroborated his story by testifying that he saw Tan being forced into a white Nissan car on August 24, 2000.

(3) Accused-appellant Ng Yik Bun (Bun) testified that he arrived in the Philippines as a tourist on August 22, 2000. On August 24, 2000, he was at a beach with some companions when four armed men arrested them. He was made to pose next to some plastic bags along with other accused-appellants, whom he did not personally know. He was then charged with illegal possession of drugs at the police station. A friend of his, accused-appellant Kwok Wai Cheng (Cheng), corroborated his story.

(4) Accused-appellant Kan Shun Min (Min) testified that he arrived in the Philippines on July 1, 2000 for business and pleasure. On August 24, 2000, he checked into a beach resort. While walking there, he was suddenly accosted by four or five men who poked guns at him. He was brought to a cottage where he saw some unfamiliar Chinese-looking individuals. He likewise testified that he was made to take out white packages from a van while being photographed. His friend, accused-appellant Chang Chaun Shi (Shi), corroborated his story.

The RTC convicted accused-appellants of the crime charged. The dispositive portion of the RTC Decision reads:

ACCORDINGLY, the Court hereby renders judgment finding the six (6) accused namely Ng Yik Bun, Kwok Wai Cheng, Chang Chaun Shi, Chua Shilou Hwan, Kan Shun Min and Raymond S. Tan (some also known by other names), GUILTY beyond reasonable doubt of violating Section 16 of RA 6425, as amended and each is hereby sentenced to suffer the penalty of RECLUSION PERPETUA and to pay a fine of Five Million Pesos (P5,000,000.00) each.

The shabu involved in this case and their accompanying paraphernalia are ordered disposed of in accordance with law, now RA 9165. The two (2) vehicles are forfeited in favor of the government.

SO ORDERED.[2]

In questioning the RTC Decision before the CA, accused-appellants Bun, Cheng, Shi, Min, and Tan raised the lone issue of: whether the trial court erred in ruling that there was a valid search and arrest despite the absence of a warrant.

On the other hand, accused-appellant Hwan sought an acquittal on the basis of the following submissions:

I

The trial court erred when it held as valid the warrantless search, seizure and subsequent arrest of the accused-appellants despite the non-concurrence of the requisite circumstances that justify a warrantless arrest as held in the case of People vs. [Cuizon].

II

The trial court violated Article III, Section 14 of the 1987 Constitution as well as Rule 115 of the Revised Rules on Criminal Procedure when it heard the case at bench on June 26, 2001 at the chemistry division of the PNP Crime Laboratory in Camp Crame, Quezon City without the presence of both the herein accused-appellant and his counsel de parte.

III

The trial court erred when it issued and dictated in open hearing a verbal order denying accused’s formal “Motion to Suppress Illegally Procured Evidence” upon a [ratiocination] that is manifestly contrary to law [and] jurisprudence set in the Cuizon case, supra.

IV

The trial court erred when with lack of the desired circumspection, it sweepingly ruled the admission in evidence the 731 exhibits listed in the prosecution’s 43-page formal offer of evidence over the itemized written objections of the defense in a terse verbal order (bereft of reason for the denial of the raised objections) dictated in open hearing which reads: “All the exhibits of the prosecution are hereby admitted. The court believes that as far as the evidence submitted goes, these exhibits of the prosecution consisting of several plastic bags of shabu were not yet shown to be the fruit of a poisonous plant.” x x x

V

The trial court also erred in admitting the prosecution’s photographs (Exhibit “K” and “M,” inclusive of their sub-markings), the photographer who took the shots not having taken the witness stand to declare, as required by the rules, the circumstances under which the photographs were taken.

VI

The trial court erred when it tried and applied the provisions of R.A. 9165, the Dangerous Drugs Act of 2002, in the instant case even though [the] crime charged took place on 24 August 2000.

VII

The trial court erred in finding conspiracy among the accused.[3]

The appellate court found accused-appellants’ contentions unmeritorious as it consequently affirmed in toto the RTC Decision.

The CA ruled that, contrary to accused-appellants’ assertion, they were first arrested before the seizure of the contraband was made. The CA held that accused-appellants were caught in flagrante delicto loading transparent plastic bags containing white crystalline substance into an L-300 van which, thus, justified their arrests and the seizure of the contraband. The CA agreed with the prosecution that the urgency of the situation meant that the buy-bust team had no time to secure a search warrant. Moreover, the CA also found that the warrantless seizure of the transparent plastic bags can likewise be sustained under the plain view doctrine.

The CA debunked accused-appellant Hwan’s arguments in seriatim. First, the CA ruled that People v. Cuizon[4] was not applicable to the instant case, as, unlike in Cuizon, the apprehending officers immediately acted on the information they had received about an ongoing shipment of drugs.

Second, the CA also noted that accused-appellant Hwan effectively waived his right to be present during the inspection of exhibits and hearing, for the manifestation made by the prosecution that accused-appellant Hwan waived his right to be present was never raised in issue before the trial court.

And third, the CA found accused-appellant Hwan’s other arguments untenable. It held that the trial court correctly admitted Exhibits “K” and “M” even if the photographer was not presented as a witness. The CA based its ruling on Sison v. People,[5] which held that photographs can be identified either by the photographer or by any other competent witness who can testify to its exactness and accuracy. It agreed with the Solicitor General that accused-appellants were correctly tried and convicted by the trial court under RA 6425 and not RA 9165, as can be gleaned from the fallo of the RTC Decision. The CA likewise dismissed the argument that conspiracy was not proved by the prosecution, noting that the evidence presented established that accused-appellants were performing “their respective task[s] with the objective of loading the plastic bags of shabu into an L-300 van.”[6]

The CA disposed of the appeal as follows:

WHEREFORE, the Decision dated April 1, 2004 of the Regional Trial Court of Quezon City, Branch 103, in Criminal Case No. Q-01-99437, is hereby AFFIRMED in toto.

SO ORDERED.[7]

On February 18, 2008, the Court, acting on the appeal of accused-appellants, required the parties to submit supplemental briefs if they so desired.

On March 27, 2008, accused-appellants Bun, Cheng, Shi, Min, and Tan filed their Supplemental Brief on the sole issue that:

THERE WAS NO VALID SEARCH AND ARREST DUE TO ABSENCE OF A WARRANT

On June 4, 2008, accused-appellant Hwan filed his Supplemental Brief, raising the following errors, allegedly committed by the trial court:

I

THE TRIAL COURT VIOLATED ARTICLE III, SECTION 14 OF THE 1987 CONSTITUTION AS WELL AS RULE 115 OF THE REVISED RULES ON CRIMINAL PROCEDURE WHEN IT CONDUCTED A HEARING ON JUNE 26, 2001 AT THE CHEMISTRY DIVISION OF THE PNP CRIME LABORATORY IN CAMP CRAME, QUEZON CITY WITHOUT THE PRESENCE OF BOTH THE HEREIN ACCUSED-APPELLANT AND HIS COUNSEL IN SUCH VITAL [PROCEEDINGS].

II

THE TRIAL COURT ERRED WHEN IT HELD AS VALID THE WARRANTLESS SEARCH, SEIZURE AND SUBSEQUENT ARREST OF THE HEREIN APPELLANT DESPITE THE NON-CONCURRENCE OF THE REQUISITE CIRCUMSTANCES THAT JUSTIFY A WARRANTLESS ARREST.

Essentially, accused-appellants claim that no valid in flagrante delicto arrest was made prior to the seizure and that the police officers placed accused-appellants under arrest even when there was no evidence that an offense was being committed. Since there was no warrant of arrest, they argue that the search sans a search warrant subsequently made on them was illegal. They contend that a seizure of any evidence as a result of an illegal search is inadmissible in any proceeding for any purpose.

Accused-appellant Hwan additionally claims that he was deliberately excluded when the trial court conducted a hearing on June 26, 2001 to identify 172 bags of shabu for trial purposes. He asserts that no formal notice of the hearing was sent to him or his counsel, to his prejudice.

The Court’s Ruling

On the issue of warrantless arrest, it is apropos to mention what the Bill of Rights under the present Constitution provides in part:

SEC. 2. The right of the people to be secure in their persons, houses, papers, and effects against unreasonable searches and seizures of whatever nature and for any purpose shall be inviolable, and no search warrant or warrant of arrest shall issue except upon probable cause to be determined personally by the judge after examination under oath or affirmation of the complainant and the witnesses he may produce, and particularly describing the place to be searched and the persons or things to be seized.

A settled exception to the right guaranteed in the aforequoted provision is that of an arrest made during the commission of a crime, which does not require a warrant. Such warrantless arrest is considered reasonable and valid under Rule 113, Sec. 5(a) of the Revised Rules on Criminal Procedure, which states:

Sec. 5. Arrest without warrant; when lawful. — A peace officer or a private person may, without a warrant, arrest a person:

(a) When, in his presence, the person to be arrested has committed, is actually committing, or is attempting to commit an offense; (Emphasis supplied.)

The foregoing proviso refers to arrest in flagrante delicto.[8] In the instant case, contrary to accused-appellants’ contention, there was indeed a valid warrantless arrest in flagrante delicto. Consider the circumstances immediately prior to and surrounding the arrest of accused-appellants: (1) the police officers received information from an operative about an ongoing shipment of contraband; (2) the police officers, with the operative, proceeded to Villa Vicenta Resort in Barangay Bignay II, Sariaya, Quezon; (3) they observed the goings-on at the resort from a distance of around 50 meters; and (4) they spotted the six accused-appellants loading transparent bags containing a white substance into a white L-300 van. The following exchange between Capt. Ibon and the prosecutor sheds light on the participation of all six accused-appellants:

Q: Upon arriving at Villa Vicenta Resort in Brgy. Bignay II, [in] what specific area [did] you position yourselves?

A: Initially we [were] about three hundred meters away from Villa Vicenta Resort, then we walked [stealthily] so as not to [be] [spotted] until we were about fifty meters sir.

Q: So you [positioned] yourself about fifty meters away from the point of Villa Vicenta Resort?

A: From the actual location we saw about six personnel walking together loading contraband.

Q: You said you [were] about fifty meters away from these six persons who were loading contraband, is that what you mean?

A: Yes sir.

Q: In that place where you [positioned] yourself, could you tell us, what was the lighting condition in the place where you positioned yourselves?

A: It was totally dark in our place sir.

Q: How about the position of the six persons who were loading contraband?

A: They were well-lighted sir.

Q: Why do you say that they are well-lighted?

A: There were several [fluorescent] lamps sir.

Q: Where?

A: One search light placed near where they were loading the shipment sir.

Q: How about the other?

A: About two fluorescent lamps at the house near the six persons your honor.

COURT: Are these portable lamps:

A: Fixed lamps your honor.

Q: Where else?

A: Another at the right corner[.] There was also somewhat a multi-purpose house and it [was] well-lighted your honor.

Q: This is a resort and that multi-purpose house that you are referring to are the cottages of the resort?

A: Yes your honor.

FISCAL: You said you saw six persons who were loading goods[.] In what vehicle [were they] transferring those things?

A: Into [an] L-300 van sir.

Q: What is the color of the van?

A: White sir.

Q: What did you see that these six persons [were] loading?

A: We saw [them] holding white plastic with white substance your honor.

Q: What container [were they] loading?

A: Actually there were several checkered bags and other plastic [bags] sir.

Q: How [were] they loading these bags?

A: [Manually] your honor.

Q: Will you please describe how they [were] loading it, Mr. Witness?

A: Actually the plastic bags [some were] repacked [into] checkered [bags] while others [were] loading inside the checkered bag sir.

Q: Did they put that on their shoulder or what?

A: Holding and holding [sic] sir.

Q: Nobody carrying [it] on their back?

A: Nobody sir.

x x x x

Q: You said you saw these six persons, will you please look around this courtroom and tell us if these six persons that you are referring to are present?

COURT: Considering that there are many persons inside this courtroom, will you please stand up and please [tap] the shoulder of these six persons?

x x x x
INTERPRETER: Witness tapped the [shoulders] of six male persons inside the courtroom.

x x x x

FISCAL: May we manifest your honor that when these six persons stood up when their names [were] called on the basis [of] what [was] written [on] the information [were] once tapped on their shoulder by this witness.

The last question I have [is] how long you stayed in this position watching these six persons loading those [products] in the L-300 van?

A: Ten to fifteen minutes sir.

Q: Within that period could you tell us what transpired?

A: I called Major Tabo to inform [him of] what I saw, I called Major Tabo through the hand-held radio sir.

Q: What was the reply of major Tabo with respect to your information?

A: He directed me to get closer to these six persons and find out if really the contraband is shabu that was first reported sir.

Q: So did you in fact go closer?

A: Yes sir.

Q: How [close] were you [to] the six persons at the time?

A: When we were closing [in] somebody noticed us and they were surprised, I immediately shouted “Freeze, don’t move, we are Filipino soldiers,” we further identified [ourselves] sir.

Q: What was the reaction of the six persons when you shouted those words?

A: They [froze] sir.

x x x x

Q: When you went closer and they [froze], what happened?

A: I asked them who among them are English-speaking?

Q: What was the reply given to you?

A: Somebody replied “tagalog lang.”

Q: Who was that person who replied “tagalog lang?”

A: Chua Shilou Hwan sir.

Q: Will you please [identify] for us who answered that in [T]agalog?

COURT: Please [tap] his shoulder.

A: This man sir.

COURT: Witness tapped the shoulder of a man who identified himself as Chua Shilou Hwan.

CHUA SHILOU HWAN: Opo.

FISCAL: After answering you [with] “tagalog lang,” what happened?

A: I further asked them “Ano ang dala ninyo?”

Q: What was the reply?

A: Chua Shilou Hwan said shabu.

Q: So [what] did you do next?

A: I asked them who is their leader, sir.

Q: What was the reply?

A: He told me it was Raymond Tan, sir.

Q: Is he inside this courtroom now?

A: Yes sir.

COURT: Please tap [his] shoulder.

WITNESS: This man sir.

COURT: Ikaw ba Raymond Tan?

INTERPRETER: A man stood and [nodded] his head.

x x x x

FISCAL: Now after they [froze], what did you do?

A: I inspected the contraband and I found these bags and I immediately called Major Tabo and informed [him of] the matter sir.

Q: How many bags were you able to confiscate in the scene?

A: All in all 172 your honor.

Q: That 172, one of them is the bag in front of you [which] you identified earlier?

A: Yes sir.

Q: When you saw that bag could you tell us what particular [contents] attracted you upon seeing these bags?

A: It was marked by the members (interrupted).

Q: No what attracted you?

A: Something crystalline white sir.

Q: Are you referring to all the bags?

A: All the bags sir.[9] x x x

Evidently, the arresting police officers had probable cause to suspect that accused-appellants were loading and transporting contraband, more so when Hwan, upon being accosted, readily mentioned that they were loading shabu and pointed to Tan as their leader. Thus, the arrest of accused-appellants––who were caught in flagrante delicto of possessing, and in the act of loading into a white L-300 van, shabu, a prohibited drug under RA 6425, as amended­­––is valid.

In People v. Alunday, we held that when a police officer sees the offense, although at a distance, or hears the disturbances created thereby, and proceeds at once to the scene, he may effect an arrest without a warrant on the basis of Sec. 5(a), Rule 113 of the Rules of Court, as the offense is deemed committed in his presence or within his view.[10] In the instant case, it can plausibly be argued that accused-appellants were committing the offense of possessing shabu and were in the act of loading them in a white van when the police officers arrested them. As aptly noted by the appellate court, the crime was committed in the presence of the police officers with the contraband, inside transparent plastic containers, in plain view and duly observed by the arresting officers. And to write finis to the issue of any irregularity in their warrantless arrest, the Court notes, as it has consistently held, that accused-appellants are deemed to have waived their objections to their arrest for not raising the issue before entering their plea.[11]

Moreover, present in the instant case are all the elements of illegal possession of drugs: (1) the accused is in possession of an item or object which is identified to be a prohibited drug; (2) such possession is not authorized by law; and (3) the accused freely and consciously possesses the said drug.[12] Accused-appellants were positively identified in court as the individuals caught loading and possessing illegal drugs. They were found to be in possession of prohibited drugs without proof that they were duly authorized by law to possess them. Having been caught in flagrante delicto, there is, therefore, a prima facie evidence of animus possidendi on the part of accused-appellants.[13] There is, thus, no merit to the argument of the defense that a warrant was needed to arrest accused-appellants.

Accused-appellants were not able to show that there was any truth to their allegation of a frame-up in rebutting the testimonies of the prosecution witnesses. They relied on mere denials, in contrast with the testimony of Capt. Ibon, who testified that he and his team saw accused-appellants loading plastic bags with a white crystalline substance into an L-300 van at the Villa Vicenta Resort. Accused-appellants, except for Tan, claimed that they were ordered by the police officers to act like they were loading bags onto the van. Accused-appellant Tan told a different tale and claims he was arrested inside a restaurant. But as the trial court found, the persons who could have corroborated their version of events were not presented in court. The only witness presented by Tan, a tricycle driver whose testimony corroborated Tan’s alone, was not found by the trial court to be credible.

As no ill motive can be imputed to the prosecution’s witnesses, we uphold the presumption of regularity in the performance of official duties and affirm the trial court’s finding that the police officers’ testimonies are deserving of full faith and credit. Appellate courts generally will not disturb the trial court’s assessment of a witness’ credibility unless certain material facts and circumstances have been overlooked or arbitrarily disregarded.[14] We find no reason to deviate from this rule in the instant case.

On the alleged lack of notice of hearing, it is now too late for accused-appellant Hwan to claim a violation of his right to examine the witnesses against him. The records show the following exchange on June 26, 2001:

FISCAL LUGTO: I would like to manifes[t] that Atty. Agoot, counsel of accused Chua Shilou Hwan, waived his right to be present for today’s trial for purposes of identification of the alleged shabu.

ATTY SAVELLANO: [Are] we made to understand that this hearing is for identification of shabu only?

FISCAL LUGTO: Yes despite the testimony of the Forensic Chemist, this is for continuation with the direct testimony for purposes of identification which was confiscated or seized by the joint operation of the Military and the PNP at Sariaya, Quezon.

For the record, this [is] for the continuation of the direct testimony of Forensic Chemist Mary Jean Geronimo.[15]

As the records confirm, accused-appellant Hwan and his counsel were not present when the forensic chemist testified. The prosecution made a manifestation to the effect that accused-appellant Hwan waived his right to be present at that hearing. Yet Hwan did not question this before the trial court. No evidence of deliberate exclusion was shown. If no notice of hearing were made upon him and his counsel, they should have brought this in issue at the trial, not at the late stage on appeal.

All told, we hold that the findings of both the RTC and the CA must be affirmed. The trial court’s determination as to the credibility of witnesses and its findings of fact should be accorded great weight and respect more so when affirmed by the appellate court. To reiterate, a look at the records shows no facts of substance and value that have been overlooked, which, if considered, might affect the outcome of the instant appeal. Deference to the trial court’s findings must be made as it was in the position to easily detect whether a witness is telling the truth or not.[16]

Penalty Imposed

Accused-appellants were each sentenced by the lower court to reclusion perpetua and to pay a fine of PhP 5,000,000. This is within the range provided by RA 6425, as amended.[17] We, therefore, affirm the penalty imposed on accused-appellants.

WHEREFORE, the appeal is DENIED. The CA Decision in CA-G.R. CR-H.C. No. 00485, finding accused-appellants Ng Yik Bun, Kwok Wai Cheng, Chang Chaun Shi, Chua Shilou Hwan, Kan Shun Min, and Raymond S. Tan guilty beyond reasonable doubt of violating Sec. 16, Art. III of RA 6425, as amended, is AFFIRMED IN TOTO.

SO ORDERED.

PRESBITERO J. VELASCO, JR.
Associate Justice

WE CONCUR:

RENATO C. CORONA
Chief Justice
Chairperson

TERESITA J. LEONARDO-DE CASTRO
Associate Justice

MARIANO C. DEL CASTILLO
Associate Justice

JOSE PORTUGAL PEREZ
Associate Justice

C E R T I F I C A T I O N

Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

RENATO C. CORONA
Chief Justice

[1] Rollo, p. 5.

[2] CA rollo, p. 46. Penned by Judge Jaime N. Salazar.

[3] Id. at 124-125.

[4] G.R. No. 109287, April 18, 1996, 256 SCRA 325.

[5] G.R. Nos. 108280-83 & 114931-33, November 16, 1995, 250 SCRA 58, 75-76.

[6] Rollo, p. 25.

[7] Id. at 26. Penned by Associate Justice Ramon M. Bato, Jr. and concurred in by Associate Justices Remedios Salazar-Fernando and Jose C. Mendoza (now a member of this Court).

[8] People v. Alunday, G.R. No. 181546, September 3, 2008, 564 SCRA 135, 146; citing People v. Doria, G.R. No. 125299, January 22, 1999, 301 SCRA 668.

[9] TSN, July 24, 2001, pp. 22-34.

[10] Supra note 8, at 147; citing People v. Sucro, G.R. No. 93239, March 18, 1991, 195 SCRA 388.

[11] People v. Tidula, G.R. No. 123273, July 16, 1998, 292 SCRA 596, 611; People v. Montilla, G.R. No. 123872, January 30, 1998, 285 SCRA 703; People v. Cabiles, G.R. No. 112035, January 16, 1998, 284 SCRA 199, 210; People v. Mahusay, G.R. No. 91483, November 18, 1997, 282 SCRA 80, 87; People v. Rivera, G.R. No. 87187, June 29, 1995, 245 SCRA 421, 430; and People v. Lopez, Jr., G.R. No. 104662, June 16, 1995, 245 SCRA 95, 105.

[12] People v. Sy, G.R. No. 147348, September 24, 2002, 389 SCRA 594, 604-605; citing Manalili v. Court of Appeals, G.R. No. 113447, October 9, 1997, 280 SCRA 400, 418.

[13] People v. Pagkalinawan, G.R. No. 184805, March 3, 2010.

[14] People v. Gregorio, Jr., G.R. No. 174474, May 25, 2007, 523 SCRA 216, 227; citing People v. Abaño, G.R. No. 142728, January 23, 2002, 374 SCRA 431.

[15] TSN, June 26, 2001, p. 1.

[16] People v. Macabare, G.R. No. 179941, August 25, 2009, 597 SCRA 119, 132; citing People v. Mateo, G.R. No. 179036, July 28, 2008, 560 SCRA 375, 394.

[17] Secs. 16 and 17 of RA 6425, as amended, provide:

Sec. 16. Possession or Use of Regulated Drugs.––The penalty of reclusion perpetua to death and a fine ranging from five hundred thousand pesos [PhP 500,000] to ten million pesos shall be imposed upon any person who shall possess or use any regulated drug without the corresponding license or prescription, subject to the provisions of Section 20 hereof.

Sec. 17. Section 20, Article IV of Republic Act No. 6425, as amended, known as the Dangerous Drugs Act of 1972, is hereby amended to read as follows:

Sec. 20. Application of Penalties, Confiscation and Forfeiture of the Proceeds or Instruments of the Crime.––The penalties for offenses under Section 3, 4, 7, 8 and 9 of Article II and Sections 14, 14-A, 15 and 16 of Article III of this Act shall be applied if the dangerous drugs involved is in any of the following quantities:

x x x x

3. 200 grams or more of shabu or methylamphetamine hydrochloride.

2011 Jan 10
G.R. Nos. 190699-700
2nd Division

see [2011R2] SPOUSES GEORGE R. TAN and SUSAN L. TAN, Petitioners, versus BANCO DE ORO UNIBANK, INC., Respondent.

2011 Jan 10
G.R. Nos. 190677-78
2nd Division

see [2011R2] SPOUSES GEORGE R. TAN and SUSAN L. TAN, Petitioners, versus BANCO DE ORO UNIBANK, INC., Respondent.

2011 Jan 10
G.R. No. 188792
2nd Division

RESOLUTION

NACHURA, J.:

These consolidated petitions assail the Court of Appeals (CA) September 18, 2009 Decision[1] and December 16, 2009 Resolution[2] in CA-G.R. SP No. 98307 and CA-G.R. SP No. 101421; and its March 12, 2009 Decision[3] and July 15, 2009 Resolution[4] in CA-G.R. SP No. 102799.

In CA-G.R. SP No. 98307 and CA-G.R. SP No. 101421, the appellate court dissolved the writ of preliminary injunction issued by the Regional Trial Court (RTC) of Quezon City, Branch 81, in Civil Case No. Q-07-59545, restraining the foreclosure of the real estate mortgage constituted by Spouses George R. Tan and Susan L. Tan (hereafter referred to as Spouses Tan) in favor of Banco De Oro Unibank, Inc. (BDO). The CA concluded that the issuance of the writ was unfounded and unsubstantiated. In CA-G.R. SP No. 102799, the CA found that the bond set by the RTC was grossly insufficient to cover all the damages which BDO might sustain by reason of the injunction if the court should finally decide that Spouses Tan were not entitled to the writ. It thus remanded the case to the RTC for the determination of the proper injunction bond which should not be less than P32 Million.

After the filing of the Reply to BDO’s Comment in G.R. No. 188792 and while awaiting BDO’s Comment on the petition in G.R. Nos. 190677-78 and Spouses Tan’s Comment on the petition in G.R. Nos. 190699-700, BDO moved for extension of time to file the appropriate pleading in view of the settlement of the consolidated cases.[5]

On December 16, 2010, Spouses Tan and BDO filed a Joint Manifestation and Motion to Dismiss,[6] alleging that they have come to an agreement for the amicable resolution of their respective claims to avoid the inconvenience of litigation. Attached to the motion are the Compromise Agreement executed by the parties and a copy of the RTC decision approving the agreement. The Compromise Agreement reads:

COMPROMISE AGREEMENT

This Agreement, which shall supplement Memorandum of Agreement dated 27 May 2010, is made and executed this _____ day of _______ 2010, by and between:

SPOUSES GEORGE R. TAN AND SUSAN L. TAN, Filipinos, of legal age, residing at 42 Ifugao St., La Vista Subd., Brgy. Pansol, Quezon City, hereinafter referred to as “Spouses Tan”;

- and -

BANCO DE ORO UNIBANK, INC., a banking corporation duly organized and existing under and by virtue of the laws of the Republic of the Philippines, with office address at 10/F BDO Corporate Center South Tower, Makati Avenue corner H.V. Dela Costa St., Makati City, represented herein by its Senior Vice President, Melanie S. Belen, and Vice President, Emily D. Samoy, as evidenced by the Special Power of Attorney indicating their authority, a copy of which is attached hereto as Annex “A,” hereinafter referred to as the “Bank”;

(herein after referred to singly as a “Party,” and collectively as “Parties”).

WITNESSETH: That

Spouses Tan obtained various loans and other credit accommodations from the Bank in the total principal amount of Fifty Nine Million Nine Hundred Eighty Four Thousand Six Hundred Twenty Four and 19/100 Pesos (P59,984,624.19). As security for the loans and other credit accommodations, Spouses Tan executed a Real Estate Mortgage and Amended Real Estate Mortgage on 15 January 2004 and 02 February 2004, respectively, covering a parcel of land located at 42 Ifugao Street, La Vista Subdivision, Quezon City, covered by Transfer Certificate of Title (“TCT”) No. 13600, registered in the name of George Sin Gee Tan married to Susan Lim Tan (the “Property”).

Sometime in 2006, Spouses Tan defaulted in the payment of their loan obligations. Hence, the Bank initiated foreclosure proceedings on the foregoing Real Estate Mortgage. At the auction sale on 03 December 2009, the Bank emerged as highest bidder and was issued Certificate of Sale dated 04 December 2009.

Spouses Tan filed a complaint for annulment of mortgage with the Regional Trial Court of Quezon City, docketed as Civil Case No. Q-07-59545 (the “Case”), pending before Branch 81 (the “Court”).

In order to put an end to the protracted litigation, the Bank has accepted the proposal of Spouses Tan and entered into and executed Memorandum of Agreement dated 27 May 2010 (the “MOA”).

Further to the MOA, and as a supplement thereto, and pursuant to the Court’s Order given in open court on 07 July 2010, the parties have agreed to execute this Agreement.

NOW, THEREFORE, for and in consideration of the foregoing premises, the parties hereby agree to the following terms and conditions:

1. The Bank shall allow Spouses Tan to redeem the Property for a total redemption price of SIXTY MILLION PESOS (P60,000,000.00), subject to the following terms:

a. THIRTY MILLION PESOS (P30,000,000.00), payable in five (5) years beginning June 2010, or until June 2015 (the “Term”). Spouses Tan shall pay Two Hundred Fifty Thousand Pesos (P250,000.00) a month, for sixty (60) months, with a balloon payment in the amount of Fifteen Million Pesos (P15,000,000.00) at the end of the Term.

b. For and in consideration of the amount of THIRTY MILLION PESOS (P30,000,000.00), Spouses Tan shall cede, transfer and convey to and in favor of the Bank, all its rights, possession, title and interests in a parcel of land in Roxas City covered by TCT No. T-16024, registered in the name of Spouses Tan (the “Roxas Property”).

2. On December 2010, or upon expiration of the redemption period, Spouses Tan shall allow the Bank to consolidate title over the Property.

3. Upon consolidation of title in the Bank’s name, the Bank and Spouses Tan shall execute a Contract to Sell covering the Property in accordance with the terms under Section 1.

4. Upon full payment of the amount under Section 1 (a), and the cession, transfer and conveyance to the Bank of the Roxas Property pursuant to Section 1 (b), the parties agree that Spouses Tan’s personal loan obligations with the Bank, including Spouses Tan’s personal loan obligations with then Equitable PCI Bank, shall be deemed fully settled.

5. After execution and signing, the parties shall file this Agreement with the Court for approval.

The parties hereby agree to move for the approval of this Agreement before the Court. However, the obligations under this Agreement shall be immediately enforceable even prior to the approval of this Agreement.

6. Parties agree to move for the dismissal of the Case, within fifteen (15) days from execution of all documents necessary to implement this Agreement.

7. All expenses, fees, and taxes in connection with: (a) the cession, transfer and conveyance to the Bank of the Roxas Property; and (b) the consolidation of title of the Property in the Bank’s name, shall be for the account of the Bank.

8. Upon failure of Spouses Tan to comply with any of the terms and conditions under this Agreement, the Bank shall be entitled, without necessity of any demand or notice:

a. To take immediate possession of the Property. Spouses Tan agree to peacefully surrender and immediately vacate the Property.

b. To file the necessary motion or pleading with the Court to implement this Agreement, and/or enforce its rights under law and equity.

9. Parties hereby mutually and irrevocably waive all claims, counterclaims, demands, and causes of action, which they raised, or could have raised, against each other, including future claims of whatever kind, in connection with the Case and the Property.

10. The parties confirm that the terms and conditions contained in this Agreement have been mutually agreed upon, without any act of force, fraud or undue intimidation. The parties further confirm that they have consulted their respective legal counsel, and that they understand the legal consequences of this Agreement. Accordingly, the parties hereby agree to abide by the terms and conditions hereof, which have the force and effect of a lawful right and a demandable obligation.

11. In the event that any one or more of the provisions of this Agreement be later declared invalid, illegal or unenforceable by any court of competent jurisdiction, the validity, legality and enforceability of the remaining provisions shall in no way be impaired or affected thereby.

12. The parties hereto intend for this Agreement to supplement the MOA. All terms and conditions of the MOA shall remain in full force and effect and remain unmodified except as specifically set forth in this Agreement.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above-written.

BANCO DE ORO UNIBANK, INC.

By:

Sgd. Sgd.
MELANIE S. BELEN GEORGE R. TAN

Sgd. Sgd.
EMILY D. SAMOY SUSAN L. TAN[7]

In a decision[8] dated September 15, 2010, the RTC approved the compromise agreement. Having been sealed with court approval, the compromise agreement shall govern the respective rights and obligations of the parties. In view of the foregoing, the dismissal of the consolidated petitions is in order.

WHEREFORE, premises considered, the Joint Manifestation and Motion to Dismiss is hereby GRANTED. Consequently, the consolidated petitions are DISMISSED. The cases are considered CLOSED and TERMINATED.

SO ORDERED.

ANTONIO EDUARDO B. NACHURA
Associate Justice
Acting Chairperson

WE CONCUR:

PRESBITERO J. VELASCO, JR. *
Associate Justice

TERESITA J. LEONARDO-DE CASTRO **
Associate Justice

DIOSDADO M. PERALTA
Associate Justice

LUCAS P. BERSAMIN ***
Associate Justice

ATTESTATION

I attest that the conclusions in the above Resolution had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

ANTONIO EDUARDO B. NACHURA
Associate Justice
Acting Chairperson, Second Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution and the Division Acting Chairperson’s Attestation, I certify that the conclusions in the above Resolution had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

RENATO C. CORONA
Chief Justice

* In lieu of Associate Justice Antonio T. Carpio per Raffle dated October 13, 2010.

** In lieu of Associate Justice Jose Catral Mendoza per Raffle dated October 13, 2010.

*** In lieu of Associate Justice Roberto A. Abad per Raffle dated March 8, 2010.

[1] Penned by Associate Justice Jose Catral Mendoza (now a member of this Court), with Associate Justices Myrna Dimaranan-Vidal and Antonio L. Villamor, concurring; rollo (G.R. Nos. 190699-700), pp. 56-87.

[2] Id. at 89-94.

[3] Penned by Associate Justice Monina Arevalo-Zenarosa, with Associate Justices Mariano C. del Castillo (now a member of this Court) and Ramon M. Bato, Jr., concurring; rollo (G.R. No. 188792), pp. 29-45.

[4] Id. at 83-85.

[5] Rollo (G.R. Nos. 190699-700), pp. 757-759.

[6] Id. at 771-773.

[7] Id. at 760-762.

[8] Rollo (G.R. Nos. 190677-78), pp. 150-153.

2011 Jan 10
G.R. No. 181298
1st Division

D E C I S I O N

DEL CASTILLO, J.:

Section 69 of the old National Internal Revenue Code (NIRC) allows unutilized tax credits to be refunded as long as the claim is filed within the prescriptive period. This, however, no longer holds true under Section 76 of the 1997 NIRC as the option to carry-over excess income tax payments to the succeeding taxable year is now irrevocable.

This Petition for Review on Certiorari[1] under Rule 45 of the Rules of Court seeks to set aside the January 25, 2007 Decision[2] and the January 21, 2008 Resolution[3] of the Court of Appeals (CA).

Factual Antecedents

Petitioner Belle Corporation is a domestic corporation engaged in the real estate and property business.[4]

On May 30, 1997, petitioner filed with the Bureau of Internal Revenue (BIR) its Income Tax Return (ITR) for the first quarter of 1997, showing a gross income of P741,607,495.00, a deduction of P65,381,054.00, a net taxable income of P676,226,441.00 and an income tax due of P236,679,254.00, which petitioner paid on even date through PCI Bank, Tektite Tower Branch, an Authorized Agent Bank of the BIR.[5]

On August 14, 1997, petitioner filed with the BIR its second quarter ITR, declaring an overpayment of income taxes in the amount of P66,634,290.00. The computation of which is reproduced below:

Gross Income P 833,186,319.00

Less: Deductions 347,343,565.00

Taxable Income P 485,842,754.00

Tax Rate x 35%

Tax Due P 170,044,964.00

Less: Tax Credits/Payments

(a) Prior Year’s Excess Tax Credit -

(b) 1st Quarter Payment P 236,679,254.00

(c) Creditable Withholding Tax -
____________
(P 66,634,290.00)[6]

In view of the overpayment, no taxes were paid for the second and third quarters of 1997.[7] Petitioner’s ITR for the taxable year ending December 31, 1997 thereby reflected an overpayment of income taxes in the amount of P132,043,528.00, computed as follows:

Gross Income P 1,182,473,910.00

Less: Deductions 879,485,278.00

Taxable Income P 302,988,362.00

Tax Rate x 35%

Tax Due P 106,046,021.00

Less: Tax Credits/Payments

(a) Prior Year’s Excess Tax Credit -

(b) 1st Quarter Payment P 236,679,254.00

(c) Creditable Withholding Tax (238,089,549.00)

(1,410,295.00)

REFUNDABLE AMOUNT (P 132,043,528.00) [8]

Instead of claiming the amount as a tax refund, petitioner decided to apply it as a tax credit to the succeeding taxable year by marking the tax credit option box in its 1997 ITR.[9]

For the taxable year 1998, petitioner’s amended ITR showed an overpayment of P106,447,318.00, computed as follows:

Gross Income P 1,279,810,489.00

Less: Deduction 1,346,553,546.00

Taxable Income (Loss) (P 66,743,057.00)

Tax Rate 34%

Tax Due (Regular Income Tax) - NIL

Minimum Corporate Income Tax P 25,596,210.00

Tax Due 25,596,210.00

Less: Tax Credits/Payments

(a) Prior year’s excess Tax Credits (P 132,041,528.00)

(b) Quarterly payment -

(c) Creditable tax withheld -

Tax Payable/Overpayment (P 106,447,318.00)[10]

On April 12, 2000, petitioner filed with the BIR an administrative claim for refund of its unutilized excess income tax payments for the taxable year 1997 in the amount of P106,447,318.00.[11]

Notwithstanding the filing of the administrative claim for refund, petitioner carried over the amount of P106,447,318.00 to the taxable year 1999 and applied a portion thereof to its 1999 Minimum Corporate Income Tax (MCIT) liability, as evidenced by its 1999 ITR.[12] Thus:

Gross Income P 708,888,638.00

Less: Deduction 1,328,101,776.00

Taxable Income (P 619,213,138.00)

Tax Due -

Minimum Corporate Income Tax P 14,185,874.00

Less: Tax Credits/Payments

(a) Prior year’s excess Credit P 106,447,318.00

(b) Tax Payments for the 1st & 3rd Qtrs. 0

(c) Creditable tax withheld 0 P 106,447,318.00

TAX PAYABLE/REFUNDABLE (P 92,261,444.00)[13]

Proceedings before the Court of Tax Appeals (CTA)

On April 14, 2000, due to the inaction of the respondent Commissioner of Internal Revenue (CIR) and in order to toll the running of the two-year prescriptive period, petitioner appealed its claim for refund of unutilized excess income tax payments for the taxable year 1997 in the amount of P106,447,318.00 with the CTA via a Petition for Review,[14] docketed as CTA Case No. 6070.

In answer thereto, respondent interposed that:

4. Petitioner’s alleged claim for refund/tax credit is subject to administrative routinary investigation/examination by respondent’s Bureau;

5. Petitioner failed miserably to show that the total amount of P106,447,318.00 claimed as overpaid or excess income tax is refundable;

6. Taxes paid and collected are presumed to have been paid in accordance with law; hence, not refundable;

7. In an action for tax refund, the burden is on the taxpayer to establish its right to refund, and failure to sustain the burden is fatal to the claim for refund;

8. It is incumbent upon petitioner to show that it has complied with the provisions of Section 204 (c) in relation to Section 229 of the tax Code;

9. Well-established is the rule that refunds/tax credits are construed strictly against the taxpayer as they partake the nature of tax exemptions.[15]

To prove entitlement to the refund, petitioner submitted, among others, the following documents: its ITR for the first quarter of taxable year 1997 (Exhibit “B”),[16] its tentative ITRs for taxable years 1997 (Exhibit “D”)[17] and 1998 (Exhibit “H”),[18] its final ITRs for taxable years 1997 (Exhibit “E”),[19] 1998 (Exhibit “I”)[20] and 1999 (Exhibit “J”),[21] its Letter Claim for Refund filed with the BIR (Exhibit “K”)[22] and the Official Receipt issued by PCI Bank showing the income tax payment made by petitioner in the amount of P236,679,254.00 for the first quarter of 1997 (Exhibit “C”).[23]

On April 10, 2001, the CTA rendered a Decision[24] denying petitioner’s claim for refund. It found:

[T]hat all the allegations made by the Petitioner as well as the figures accompanying Petitioner’s claim are substantiated by documentary evidence but noticed some flaws in Petitioner’s application of the pertinent laws involved.

It bears stressing that the applicable provision in the case at bar is Section 69 of the old Tax Code and not Section 76 of the 1997 Tax Code. Settled is the rule that under Section 69 of the old Tax Code, the carrying forward of any excess/overpaid income tax for a given taxable year is limited only up to the succeeding taxable year.

A painstaking scrutiny of Petitioner’s income tax returns would show that Petitioner carried over its 1997 refundable tax of P132,043,528.00 to the succeeding year of 1998 yielding an overpayment of P106,447,318.00 (Exhibit I-1) after deducting therefrom the minimum Corporate Income tax of P25,596,210.00. However, Petitioner even went further to the taxable year 1999 and applied the Prior Year’s (1998) Excess Credit of P106,447,318.00 to its income tax liability.

True enough, upon verification of Petitioner’s 1999 Corporate Annual Income Tax Return (Exh. I), this Court found that the whole amount of P106,447,318.00 representing its prior year’s excess credit (subject of this claim) was carried forward to its 1999 income tax liability, details of the 1999 Income Tax Return are shown below as follows:

Gross Income P 708,888,638.00

Less: Deductio 1,328,101,776.00

Taxable Income (P 619,213,138.00)

Tax Due –

Minimum Corporate Income Tax P 14,185,874.00

Less: Tax Credits/Payments

(a) Prior year’s excess Credit P 106,447,318.00

(b) Tax Payments for the 1st & 3rd Qtrs. 0

(c) Creditable tax withheld 0 P 106,447,318.00

TAX PAYABLE/REFUNDABLE (P 92,261,444.00)

It is an elementary rule in taxation that an automatic carry over of an excess income tax payment should only be made for the succeeding year. (Paseo Realty and Dev’t. Corp. vs. CIR, CTA Case No. 4528, April 30, 1993) True enough, implicit from the provisions of Section 69 of the NIRC, as amended, (supra) is the fact that the refundable amount may be credited against the income tax liabilities for the taxable quarters of the succeeding taxable year not succeeding years; and that the carry-over is only limited to the quarters of the succeeding taxable year. (citing ANSCOR Hagedorn Securities Inc. vs. CIR, CA-GR SP 38177, December 21, 1999) To allow the application of excess taxes paid for two successive years would run counter to the specific provision of the law above-mentioned.[25] (Emphasis supplied.)

Petitioner sought reconsideration[26] of the CTA’s denial of its claim for refund, but the same was denied in a Resolution[27] dated June 5, 2001, prompting petitioner to elevate the matter to the CA via a Petition for Review[28] under Rule 43 of the Rules of Court.

Ruling of the Court of Appeals

On January 25, 2007, the CA, applying Philippine Bank of Communications v. Commissioner of Internal Revenue,[29] denied the petition. The CA explained that the overpayment for taxable year 1997 can no longer be carried over to taxable year 1999 because excess income payments can only be credited against the income tax liabilities of the succeeding taxable year, in this case up to 1998 only and not beyond.[30] Neither can the overpayment be refunded as the remedies of automatic tax crediting and tax refund are alternative remedies.[31] Thus, the CA ruled:

[W]hile BELLE may not have fully enjoyed the complete utilization of its option and the sum of Php106,447,318 still remained after it opted for a tax carry over of its excess payment for the taxable year 1998, but be that as it may, BELLE has only itself to blame for making such useless and damaging option, and BELLE may no longer opt to claim for a refund considering that the remedy of refund is barred after the corporation has previously opted for the tax carry over remedy. As a matter of fact, the CTA even made the factual findings that BELLE committed an aberration to exhaust its unutilized overpaid income tax by carrying it over further to the taxable year 1999, which is a blatant transgression of the “succeeding taxable year limit” provided for under Section 69 of the old NIRC.[32] (Emphasis supplied)

Hence, the fallo of the Decision reads:

WHEREFORE, premises considered, the instant Petition for Review is DENIED, and accordingly, the herein impugned April 10, 2001 Decision and June 5, 2001 Resolution of the CTA are hereby affirmed.

SO ORDERED.[33]

Petitioner moved for reconsideration.[34] The CA, however, denied the same in a Resolution[35] dated January 21, 2008.

Issues

Aggrieved, petitioner availed of the present recourse, raising the following assignment of errors:

A. THE CA COMMITTED SERIOUS ERROR OF LAW IN APPLYING THE PBCOM CASE.

A.1. THE [DECISION IN THE] PBCOM CASE HAS ALREADY BEEN REPEALED.

A.2. ASSUMING ARGUENDO THAT THE [DECISION IN THE] PBCOM CASE HAS NOT BEEN REPEALED, IT HAS NO APPLICATION TO BELLE.

B. THE CA COMMITTED SERIOUS ERROR OF LAW IN FINDING THAT BELLE’S REFUND CLAIM IS NOT ON ALL FOURS WITH THE CASES OF BPI FAMILY AND AB LEASING.

B.1. BELLE’S ‘CARRYING-OVER’ OF ITS EXCESS INCOME TAX PAID FOR 1997 TO 1999 (BEYOND THE SUBSEQUENT YEAR) IS IMMATERIAL.

B.2. BELLE’S PARTIAL USE OF ITS EXCESS INCOME TAX PAID IN 1998 (THE SUBSEQUENT YEAR) DOES NOT PRECLUDE BELLE FROM ASKING FOR A REFUND.[36]

In a nutshell, the issue boils down to whether petitioner is entitled to a refund of its excess income tax payments for the taxable year 1997 in the amount of P106,447,318.00.

Petitioner’s Arguments

Petitioner insists that it is entitled to a refund as the ruling in Philippine Bank of Communications v. Commissioner of Internal Revenue[37] relied upon by the CA in denying its claim has been overturned by BPI-Family Savings Bank, Inc. v. Court of Appeals,[38] AB Leasing and Finance Corporation v. Commissioner of Internal Revenue,[39] Calamba Steel Center, Inc. v. Commissioner of Internal Revenue,[40] and State Land Investment Corporation v. Commissioner of Internal Revenue.[41] In these cases, the taxpayers were allowed to claim refund of unutilized tax credits.[42] Similarly, in this case, petitioner asserts that it may still recover unutilized tax credits via a claim for refund.[43]

And while petitioner admits that it has committed a “blatant transgression” of the “succeeding taxable year limit” when it carried over its 1997 excess income tax payments beyond the taxable year 1998, petitioner believes that this should not result in the denial of its claim for refund but should only invalidate the application of its 1997 unutilized excess income tax payments to its 1999 income tax liabilities.[44] Hence, petitioner postulates that a claim for refund of its unutilized tax credits for the taxable year 1997 may still be made because the carry-over thereof to the taxable year 1999 produced no legal effect, and is, therefore, immaterial to the resolution of its claim for refund.[45]

Respondent’s Arguments

Respondent, on the other hand, maintains that the cases of BPI-Family Savings Bank[46] and AB Leasing[47] are inapplicable as the facts obtaining therein are different from those of the present case.[48] What is controlling, therefore, is the ruling in Philippine Bank of Communications,[49] that tax refund and tax credit are alternative remedies; thus, “the choice of one precludes the other.”[50] Respondent, therefore, submits that since petitioner has already applied its 1997 excess income tax payments to its liabilities for taxable year 1998, it is precluded from carrying over the same to taxable year 1999, or from filing a claim for refund.[51]

Our Ruling

The petition has no merit.

Both the CTA and the CA erred in applying Section 69[52] of the old NIRC. The law applicable is Section 76 of the NIRC.

Unutilized excess income tax payments may be refunded within two years from the date of payment under Section 69 of the old NIRC

Under Section 69 of the old NIRC, in case of overpayment of income taxes, a corporation may either file a claim for refund or carry-over the excess payments to the succeeding taxable year. Availment of one remedy, however, precludes the other.[53]

Although these remedies are mutually exclusive, we have in several cases allowed corporations, which have previously availed of the tax credit option, to file a claim for refund of their unutilized excess income tax payments.

In BPI-Family Savings Bank,[54] the bank availed of the tax credit option but since it suffered a net loss the succeeding year, the tax credit could not be applied; thus, the bank filed a claim for refund to recover its excess creditable taxes. Brushing aside technicalities, we granted the claim for refund.

Likewise, in Calamba Steel Center, Inc.,[55] we allowed the refund of excess income taxes paid in 1995 since these could not be credited to taxable year 1996 due to business losses. In that case, we declared that “a tax refund may be claimed even beyond the taxable year following that in which the tax credit arises x x x provided that the claim for such a refund is made within two years after payment of said tax.”[56]

In State Land Investment Corporation,[57] we reiterated that “if the excess income taxes paid in a given taxable year have not been entirely used by a x x x corporation against its quarterly income tax liabilities for the next taxable year, the unused amount of the excess may still be refunded, provided that the claim for such a refund is made within two years after payment of the tax.”[58]

Thus, under Section 69 of the old NIRC, unutilized tax credits may be refunded as long as the claim is filed within the two-year prescriptive period.

The option to carry over excess income tax payments is irrevocable under Section 76 of the 1997 NIRC

This rule, however, no longer applies as Section 76 of the 1997 NIRC now reads:

Section 76. Final Adjustment Return. – Every corporation liable to tax under Section 24 shall file a final adjustment return covering the total net income for the preceding calendar or fiscal year. If the sum of the quarterly tax payments made during the said taxable year is not equal to the total tax due on the entire taxable net income of that year the corporation shall either:

(a) Pay the excess tax still due; or

(b) Be refunded the excess amount paid, as the case may be.

In case the corporation is entitled to a refund of the excess estimated quarterly income taxes paid, the refundable amount shown on its final adjustment return may be credited against the estimated quarterly income tax liabilities for the taxable quarters of the succeeding taxable years. Once the option to carry over and apply the excess quarterly income tax against income tax due for the taxable quarters of the succeeding taxable years has been made, such option shall be considered irrevocable for that taxable period and no application for tax refund or issuance of a tax credit certificate shall be allowed therefor. (Emphasis supplied)

Under the new law, in case of overpayment of income taxes, the remedies are still the same; and the availment of one remedy still precludes the other. But unlike Section 69 of the old NIRC, the carry-over of excess income tax payments is no longer limited to the succeeding taxable year. Unutilized excess income tax payments may now be carried over to the succeeding taxable years until fully utilized. In addition, the option to carry-over excess income tax payments is now irrevocable. Hence, unutilized excess income tax payments may no longer be refunded.

In the instant case, both the CTA and the CA applied Section 69 of the old NIRC in denying the claim for refund. We find, however, that the applicable provision should be Section 76 of the 1997 NIRC because at the time petitioner filed its 1997 final ITR, the old NIRC was no longer in force. In Commissioner of Internal Revenue v. McGeorge Food Industries, Inc.,[59] we explained that:

Section 76 and its companion provisions in Title II, Chapter XII should be applied following the general rule on the prospective application of laws such that they operate to govern the conduct of corporate taxpayers the moment the 1997 NIRC took effect on 1 January 1998. There is no quarrel that at the time respondent filed its final adjustment return for 1997 on 15 April 1998, the deadline under Section 77 (B) of the 1997 NIRC (formerly Section 70(b) of the 1977 NIRC), the 1997 NIRC was already in force, having gone into effect a few months earlier on 1 January 1998. Accordingly, Section 76 is controlling.

The lower courts grounded their contrary conclusion on the fact that respondent’s overpayment in 1997 was based on transactions occurring before 1 January 1998. This analysis suffers from the twin defects of missing the gist of the present controversy and misconceiving the nature and purpose of Section 76. None of respondent’s corporate transactions in 1997 is disputed here. Nor can it be argued that Section 76 determines the taxability of corporate transactions. To sustain the rulings below is to subscribe to the untenable proposition that, had Congress in the 1997 NIRC moved the deadline for the filing of final adjustment returns from 15 April to 15 March of each year, taxpayers filing returns after 15 March 1998 can excuse their tardiness by invoking the 1977 NIRC because the transactions subject of the returns took place before 1 January 1998. A keener appreciation of the nature and purpose of the varied provisions of the 1997 NIRC cautions against sanctioning this reasoning.[60]

Accordingly, since petitioner already carried over its 1997 excess income tax payments to the succeeding taxable year 1998, it may no longer file a claim for refund of unutilized tax credits for taxable year 1997.

To repeat, under the new law, once the option to carry-over excess income tax payments to the succeeding years has been made, it becomes irrevocable. Thus, applications for refund of the unutilized excess income tax payments may no longer be allowed.

WHEREFORE, the petition is hereby DENIED. The Decision dated January 25, 2007 and the Resolution dated January 21, 2008 of the Court of Appeals are hereby AFFIRMED only insofar as the denial of petitioner’s claim for refund is concerned.

SO ORDERED.

MARIANO C. DEL CASTILLO
Associate Justice

WE CONCUR:

RENATO C. CORONA
Chief Justice
Chairperson

PRESBITERO J. VELASCO, JR.
Associate Justice

TERESITA J. LEONARDO-DE CASTRO
Associate Justice

JOSE PORTUGAL PEREZ
Associate Justice

C E R T I F I C A T I O N

Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

RENATO C. CORONA
Chief Justice

[1] Rollo, pp. 9-140, with Annexes “A” to “Q,” inclusive.

[2] Id. at 42-51; penned by Associate Justice Rosmari D. Carandang and concurred in by Associate Justices Martin S. Villarama, Jr. (Now Supreme Court Justice), and Mariflor P. Punzalan Castillo.

[3] Id. at 65-68.

[4] Id. at 101.

[5] Id. at 101-102.

[6] CTA Division rollo, p. 2.

[7] Id. at 2.

[8] Rollo, pp. 102-103.

[9] Id. at 103.

[10] Id.

[11] Id.

[12] CTA Division rollo, p. 281.

[13] Rollo, p. 107.

[14] Id. at 103.

[15] CTA Division rollo, pp. 127-128.

[16] Id. at 178.

[17] Id. at 180-190.

[18] Id. at 223-249.

[19] Id. at 191-218.

[20] Id. at 250-280.

[21] Id. at 281-320.

[22] Id. at 321-327.

[23] Id. at 179.

[24] Rollo, pp. 101-109; penned by Associate Judge Amancio Q. Saga and concurred in by Presiding Judge Ernesto D. Acosta.

[25] Id. at 106-108.

[26] Id. at 110-120.

[27] Id. at 121-124.

[28] Id. at 125-140.

[29] 361 Phil. 916 (1999).

[30] Rollo, pp. 46-48.

[31] Id. at 48-50.

[32] Id. at 49-50.

[33] Id.

[34] Id. at 54-63.

[35] Id. at 65-68.

[36] Id. at 17-18.

[37] Supra note 29.

[38] 386 Phil. 719 (2000).

[39] 453 Phil. 297 (2003).

[40] 497 Phil. 23 (2005).

[41] G.R. No. 171956, January 18, 2008, 542 SCRA 114.

[42] Rollo, pp. 206-209.

[43] Id. at 209.

[44] Id. at 30-32, 223-227.

[45] Id. at 225-227.

[46] Supra note 38.

[47] Supra note 39.

[48] Rollo, p. 161.

[49] Supra note 29 at 932.

[50] Rollo, p. 158-159.

[51] Id. at 157.

[52] Section 69. Final Adjustment Return. – Every corporation liable to tax under Section 24 shall file a final adjustment return covering the total net income for the preceding calendar or fiscal year. If the sum of the quarterly tax payments made during the said taxable year is not equal to the total tax due on the entire taxable net income of that year the corporation shall either:

(a) Pay the excess tax still due; or

(b) Be refunded the excess amount paid, as the case may be.

In case the corporation is entitled to a refund of the excess estimated quarterly income taxes paid, the refundable amount shown on its final adjustment return may be credited against the estimated quarterly income tax liabilities for the taxable quarters of the succeeding taxable year. (Emphasis supplied.)

[53] Supra note 29.

[54] Supra note 38.

[55] Supra note 40 at 31.

[56] Id.

[57] Supra note 41 at 122.

[58] Id.

[59] G.R. No. 174157, October 20, 2010.

[60] Id.

Republic of the Philippines
CONGRESS OF THE PHILIPPINES
Metro Manila

Fourteenth Congress
Third Regular Session

Begun and held in Metro Manila, on Monday, the twenty-seventh day of July, two thousand nine.

Republic Act No. 9945

AN ACT ESTABLISHING A NATIONAL HIGH SCHOOL IN BARANGAY CALANDAGAN, MUNICIPALITY OF ARACELI, PROVINCE OF PALAWAN TO BE KNOWN AS CALANDAGAN NATIONAL HIGH SCHOOL AND APPROPRIATING FUNDS THEREFOR

Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled:

Section 1. Establishment of a National High School. – There is hereby established, under the supervision of the Department of Education, a national high school in Barangay Calandagan, Municipality of Araceli, Province of Palawan to be known as Calandagan National High School.

Section 2. Appropriations. – The Secretary of Education shall immediately include in the Department’s program the operationalization of the Calandagan National High School, the funding of which shall be included in the annual General Appropriations Act.

Section 3. Implementation. – The Secretary of Education shall issue rules and regulations that may be necessary to carry out the purpose of this Act.

Section 4. Effectivity. – This Act shall take effect fifteen (15) days after its publication in the Official Gazette.

Approved,

JUAN PONCE ENRILE
President of the Senate

PROSPERO C. NOGRALES
Speaker of the House of Representatives

This Act which originated in the House of Representatives was finally passed by the House of Representatives and the Senate on February 10, 2009 and October 12, 2009, respectively.

EMMA LIRIO-REYES
Secretary of the Senate

MARILYN B. BARUA-YAP
Secretary General House of Representatives

Approved: JAN. 07, 2010

GLORIA MACAPAGAL-ARROYO
President of the Philippines

Republic of the Philippines
CONGRESS OF THE PHILIPPINES
Metro Manila

Fourteenth Congress
Third Regular Session

Begun and held in Metro Manila, on Monday, the twenty-seventh day of July, two thousand nine.

Republic Act No. 9944

AN ACT ESTABLISHING A NATIONAL HIGH SCHOOL IN BARANGAY CONCEPCION, MUNICIPALITY OF AGUTAYA, PROVINCE OF PALAWAN TO BE KNOWN AS CONCEPCION NATIONAL HIGH SCHOOL AND APPROPRIATING FUNDS THEREFOR

Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled:

Section 1. Establishment of a National High School. – There is here by established, under the supervision of the Department of Education, a national high school in Barangay Concepcion, Municipality of Agutaya, Province of Palawan to be known as Concepcion National High School.

Section 2. Appropriations. – The Secretary of Education shall immediately include in the Department’s program the operationalization of the Concepcion National High School, the funding of which shall be included in the annual General Appropriations Act.

Section 3. Implementation. – The Secretary of Education shall issue ru1es and regulations that may be necessary to carry out the purpose of this Act.

Section 4. Effectivity. – This Act shall take effect fifteen (15) days after its publication in the Official Gazette .

Approved,

JUAN PONCE ENRILE
President of the Senate

PROSPERO C. NOGRALES
Speaker of the House of Representatives

This Act which originated in the House of Representatives was finally passed by the House of Representatives and the Senate on February 10, 2009 and October 12, 2009, respectively.

EMMA LIRIO-REYES
Secretary of the Senate

MARILYN B. BARUA-YAP
Secretary General House of Representatives

Approved: JAN. 07, 2010

GLORIA MACAPAGAL-ARROYO
President of the Philippines

Republic of the Philippines
CONGRESS OF THE PHILIPPINES
Metro Manila

Fourteenth Congress
Third Regular Session

Begun and held in Metro Manila, on Monday, the twenty-seventh day of July, two thousand nine.

Republic Act No. 9943

AN ACT SEPARATING THE AGUSAN NATIONAL HIGH SCHOOL – BUGO ANNEX IN BARANGAY BUGO, CITY OF CAGAYAN DE ORO, PROVINCE OF MISAMIS ORIENTAL FROM THE AGUSAN NATIONAL HIGH SCHOOL, CONVERTING IT INTO AN INDEPENDENT NATIONAL HIGH SCHOOL TO BE KNOWN AS BUGO NATIONAL HIGH SCHOOL AND APPROPRIATING FUNDS THEREFOR

Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled:

Section 1. Separation and Conversion into a National High School. – The Agusan National High School – Bugo Annex in Barangay Bugo, City of Cagayan de Oro, Province of Misamis Oriental is hereby separated from the Agusan National High School and converted into an independent national high school to be known as Bugo National High School.

Section 2. Transfer of Assets and Liabilities. – All personnel, assets, liabilities and records of the Agusan National High School – Bugo Annex are here by transferred to and absorbed by the Bugo National High School.

Section 3. Appropriations. – The Secretary of Education shall immediately include in the Department’s program the operationalization of the Bugo National High School, the initial funding of which shall be charged against the current year’s appropriations of the Agusan National High School – Bugo Annex. Thereafter, the amount necessary for the continued operation of the school shall be included in the annual General Appropriations Act.

Section 4. Implementation. – The Secretary of Education shall issue rules and regulations that may be necessary to carry out the purpose of this Act.

Section 5. Effectivity. – This Act shall take effect fifteen (15) days after its publication in the Official Gazette.

Approved,

JUAN PONCE ENRILE
President of the Senate

PROSPERO C. NOGRALES
Speaker of the House of Representatives

This Act which originated in the House of Representatives was finally passed by the House of Representatives and the Senate on December 3, 2008 and October 13, 2009, respectively.

EMMA LIRIO-REYES
Secretary of the Senate

MARILYN B. BARUA-YAP
Secretary General House of Representatives

Approved: JAN. 07, 2010

GLORIA MACAPAGAL-ARROYO
President of the Philippines

Republic of the Philippines
CONGRESS OF THE PHILIPPINES
Metro Manila

Fourteenth Congress
Third Regular Session

Begun and held in Metro Manila, on Monday, the twenty-seventh day of July, two thousand nine.

Republic Act No. 9942

AN ACT SEPARATING THE AGUSAN NATIONAL HIGH SCHOOL – PUERTO ANNEX IN BARANGAY PUERTO, CITY OF CAGAYAN DE ORO, PROVINCE OF MISAMIS ORIENTAL FROM THE AGUSAN NATIONAL HIGH SCHOOL, CONVERTING IT INTO AN INDEPENDENT NATIONAL HIGH SCHOOL TO BE KNOWN AS PUERTO NATIONAL HIGH SCHOOL AND APPROPRIATING FUNDS THEREFOR

Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled:

Section 1. Separation and Conversion into a National High School. – The Agusan National High School – Puerto Annex in Barangay Puerto, City of Cagayan de Oro, Province of Misamis Oriental is hereby separated from the Agusan National High School and converted into an independent national high school to be known as Puerto National High School.

Section 2. Transfer of Assets and Liabilities. – All personnel, assets, liabilities and records of the Agusan National High School – Puerto Annex are hereby transferred to and absorbed by the Puerto National High School.

Section 3. Appropriations. – The Secretary of Education shall immediately include in the Department’s program the operationalization of the Puerto National High School, the initial funding of which shall be charged against the current year’s appropriations of the Agusan National High School – Puerto Annex. Thereafter, the amount necessary for the continued operation of the school shall be included in the annual General Appropriations Act.

Section 4. Implementation. – The Secretary of Education shall issue rules and regulations that may be necessary to carry out the purpose of this Act.

Section 5. Effectivity. – This Act shall take effect fifteen (15) days after its publication in the Official Gazette.

Approved,

JUAN PONCE ENRILE
President of the Senate

PROSPERO C. NOGRALES
Speaker of the House of Representatives

This Act which originated in the House of Representatives was finally passed by the House of Representatives and the Senate on December 3, 2008 and October 13, 2009, respectively.

EMMA LIRIO-REYES
Secretary of the Senate

MARILYN B. BARUA-YAP
Secretary General House of Representatives

Approved: JAN. 07, 2010

GLORIA MACAPAGAL-ARROYO
President of the Philippines