Credit Cases 21 to 30

7/28/2019 Credit Cases 21 to 30

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CASE 21

G.R. No. 134114 July 6, 2001

NESTLE PHILIPPINES, INC., (FORMERLY FILIPRO, INC.), petitioner,

vs.HONORABLE COURT OF APPEALS, COURT OF TAX APPEALS andCOMMISSIONER OF CUSTOMS,respondents.

DELEON, JR., J.:

Challenged in this petition for review on certiorari is the Decisio1 in CA-G.R SP No.431882 dated September 23, 1997 of the Court of Appeals which affirmed the Decision 3 datedMay 30, 1995 of the Court of Tax Appeals in C.T.A. Case No. 44784 dismissing petitioner'spetition for review to compel the Commissioner of Customs to grant it a refund of allegedlyoverpaid import duties, on its various importations of milk and milk products, amounting to Five

Million Eight Thousand and Twenty-Nine Pesos (P5,008,029.00).

Petitioner's motion for reconsideration thereof was denied by the Court of Appeals in aResolution5 dated June 9, 1998.

The antecedent facts are as follows.

Petitioner is a duly organized domestic corporation engaged in the importations of milk and milkproducts for processing, distribution and sale in the Philippines. Between July and November1984, petitioner transacted sixteen (16) separate importations of milk and milk products fromdifferent countries. Petitioner was assessed customs duties and advance sales taxes by the

Collector of Customs of Manila for each of these separate importations on the basis of thepublished Home Consumption Value (HCV) indicated in the Bureau of Customs RevisionOrders. Petitioner paid the same but seasonably filed the corresponding protests before the saidCollector of Customs from October 25 to December 5, 1984, uniformly alleging therein that thelatter erroneously applied higher home consumption values in determining the dutiable value foreach of these separate importations. In the said protests, petitioner claims for refund of both thealleged overpaid import duties amounting to Five Million Eight Thousand and Twenty-NinePesos (P5,008,029.00) and advance sales taxes aggregating to Four Million Five Hundred Sixty-Four Thousand One Hundred Seventy-Nine Pesos and Thirty Centavos (P4,564,179.30).

On October 14, 1986, petitioner formally filed a claim for refund of allegedly over paid advance

sales taxes with the Bureau of Internal Revenue (BIR) amounting to Four Million Five HundredSixty-Four Thousand One Hundred Seventy-Nine Pesos and Thirty Centavos (P4,564,179.30)covering the same sixteen (16) importations of milk and milk products from different countries.Not long after, on October 15, 1986 and within the two-year prescriptive period provided forunder the National Internal Revenue Code (NIRC) for claiming a tax refund, petitioner filed thecorresponding petition for review with the Court of Tax Appeals (CTA) which was docketedtherein as C.T.A. Case No. 4114. On January 3, 1994, the tax court ruled in favor of petitionerand forthwith ordered the BIR to refund to the petitioner the sum of Four Million Four Hundred


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Eighty-Nine Thousand Six Hundred Sixty-One Pesos and Ninety-Four Centavos (P4,489,661.94)representing the overpaid Advance Sales Taxes on the aforesaid importations.

On the other hand, the sixteen (16) protest cases for refund of alleged overpaid customs dutiesamounting to Five Million Eight Thousand Twenty-Nine Pesos (P5,008,029.00) were left with

the Collector of Customs of Manila. However, the said Collector of Customs failed to render hisdecision thereon after almost six (6) years since petitioner paid under protest the customs dutieson the said sixteen (16) importations of milk and milk products and filed the correspondingprotests.

Consequently, in order to prevent these claims from becoming stale on the ground ofprescription, petitioner immediately filed a petition for review docketed as C.T.A. Case No.4478, with the Court of Tax Appeals on August 2, 1990 despite the absence of a ruling on itsprotests from both the Collector of Customs of Manila and the Commissioner of Customs.

On May 30, 1995, the CTA rendered judgment dismissing C.T.A. Case No. 4478 for want of

jurisdiction.

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The subsequent motion or reconsideration filed petitioner on July 11, 1995 wasdenied for lack of merit in a Resolution' dated January 6, 1997.

Aggrieved, petitioner appealed on February 10, 1999 the said judgment and resolution of theCTA in C.T.A. Case No. 4478 to the Court of Appeals by way of petition for review on certiorariunder Rule 45 of the Rules of Court. However, this appeal was later dismissed by the appellatecourt on September 23, 1997 for lack of merit. The Court of Appeals opined, inter alia, that theCTA's jurisdiction is not concurrent with the appellate jurisdiction of the Commissioner ofCustoms since there was no decision or ruling yet of the Collector of Customs of Manila on thematter; that the petition does not fall under any of the recognized exceptions on exhaustion ofadministrative remedies to justify petitioner's immediate resort to the CTA; that the petitioner

failed to move for the early resolution of its claims for refund nor was there any notice given thatthe said Collector of Customs' continued inaction on its claims would be deemed a denial of itsclaims; and that petitioner also neglected to cite any law or jurisprudence which prescribes aperiod for filing an appeal in the CTA even if there was no action yet by the Commissioner ofCustoms.

On June 9, 1998, the appellate court issued a Resolution8 denying petitioner's motion forreconsideration for lack of merit.

Hence, this petition.

Petitioner assigns the following as errors, to wit:

1. RESPONDENT COURT OF APPEALS ACTED WITH GRAVE ABUSE OFDISCRETION IN HOLDING THAT THE FILING OF PROTEST CASES BEFORETHE COLLECTOR OF CUSTOMS HAD EFFECTIVELY INTERRUPTED THERUNNING OF THE SIX-YEAR PRESCRIPTIVE PERIOD;


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2 RESPONDENT COURTS COMMITED FUNDAMENTAL ERRORS AND ACTEDWITH GRAVE ABUSE OF DISCRETIONS IN HOLDING THAT PETITIONER HADFAILED TO EXHAUST ADMINISTRATIVE REMEDIES, NOTWITHSTANDINGALMOST 6 YEARS OF PROTRACTED HEARINGS OF THE 16 PROTEST CASESWITH THE CUSTOMS COLLECTOR AND FILING OF THE PETITION ONLY

WHEN THE SIX-YEAR PRESCRIPTIVE PERIOD WAS ABOUT TO EXPIRE TOAVOID NULLIFICATION OF CLAIMS ON GROUND OF PRESCRIPTION;

3. THE RESPONDENT COURTS GRAVELY ERRED IN DISMISSING ON SHEERTECHNICALITIES PETITIONER'S CLAIMS FOR THE REFUND OF P5,008,029.08(SIC) OVERPAID DUTIES, WHEN THE FACTS OF OVERPAYMENTS HAD BEENEARLIER RESOLVED IN CTA CASE NO. 4114, HOLDING THAT THE WRONGAPPLICATION OF THE HIGHER HOME CONSUMPTION VALUES RESULTED INTHE OVERPAYMENTS OF DUTIES AND TAXES, AND UPON WHICH, ITORDERED THE REFUND OF P4,489,661.94 IN OVERPAID TAXES. THERE IS NOVALID REASON THEREFORE WHY THE CORRESPONDING OVERPAYMENTS

IN CUSTOMS DUTIES CAN NOT ALSO BE REFUNDED TO ITS RIGHTFULOWNER, THE PETITIONER HEREIN.

In this petition, petitioner asserts that tax refunds are based on quasi-contract orsolutionindebiti, which under Article 11459 of the Civil Code, prescribes in six (6) years. Consequently,the pendency of its protest cases before the office of the Collector of Customs of Manila did notinterrupt the running of the prescriptive period under the aforesaid provision of law consideringthat it is only an administrative body performing only quasi-judicial function and not a regularcourt of justice.10 Thus, in like manner the thirty-day period for appealing to the CTA must bemade within the six-year prescriptive period.

Petitioner further contends that the fact of overpayment of customs duties has been dulyestablished and resolved with finality by the Court of Tax Appeal on January 3, 1994 in C.T.A.Case No. 4114.11 In that case, the tax court found that the Bureau of Customs erroneously usedthe wrong home consumption value in assessing the petitioner the Advance Sales Tax on itssubject sixteen (16) importations. The tax court then ordered the Commissioner of InternalRevenue to refund to the petitioner the sum of Four Million Four Hundred Eighty-NineThousand Six Hundred Sixty-One Pesos and Ninety-Four Centavos (P4,489,661.94),representing overpaid advance sales tax covering the same sixteen (16) importations. It is alsofrom the same sixteen (16) separate importations of milk and milk products that petitioner basedits claims for refund of overpayment of customs duties. Thus, petitioner avers that its claims forrefund of overpaid customs duties must likewise be granted and awarded in its favor.

In lieu of Comment,12 the Solicitor General manifested that there is merit in petitioner's argumentconsidering that petitioner's cause of action to recover a tax erroneously paid is based on solutioindebiti which is expressly classified as a quasi-contract under the Civil Code; that petitioner'scause of action would have prescribed on August 2, 1990 if it did not bring the matter before theCTA; and that the Collector of Customs has not even acted or resolved the petitioner's severalprotests it had filed before his office within six (6) years after it made the earliest payment ofadvance customs duties on its importations.


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There was also no violation of the principle of exhaustion of administrative remedies in this case.This doctrine does not apply to the case at bar since its observance would only result in thenullification of the claim for refund being asserted nor would it provide a plain, speedy andadequate remedy under the circumstances. This notwithstanding, however, the Solicitor Generalfurther opined that this case should be remanded to the CTA in order for the tax court to

determine the veracity of petitioner's claim.

On the other hand, respondent Commissioner of Customs, in his Comment 13 dated August 21,2000, admitted with regret, their official inaction adverted to by the petitioner. RespondentCommissioner expressed the view that petitioner's claim for refund of customs duties should notoutrightly be denied by virtue of the strict adherence to the rules to prevent grave injustice tohapless taxpayers; that this does not justify, however, an outright award of the refund of allegedoverpayment of customs duties in favor of petitioner; and that there is no definite factualdetermination yet that the customs duties and taxes in question were overpaid and refundable,and if refundable how much is the refundable amount. The fact that the Collector of Customs ofManila failed to act or decide on the petitioner's protest cases filed before his Office does not

relieve the petitioner of its burden to prove that it is entitled to the refund sought for. Thus,respondent Commissioner of Customs, thru his special counsel, recommended that this case beremanded to the court of origin, namely, the CTA.

The recommendations of both the Solicitor General and the respondent Commissioner ofCustoms are well taken. After a meticulous consideration of this case, we find that therecommended remand of this case to the CTA is warranted for the proper verification anddetermination of thefactual basis and merits of this petition and in, order that the ends ofsubstantial justice and fair play may be subserved. We are of the view that the saidrecommendation is in accord with the provisions of the Tariff and Customs Code as hereinafterdiscussed.

The right to claim for refund of customs duties is specifically governed by Section 1708 of theTariff and Customs Code, which provides that -

"Sec. 1708. Claim for Refund of Duties and Taxes and Mode of Payment. - All claims forrefund of duties shall be made in writing and forwarded to the Collector to whomsuch duties are paid, who upon receiptof such claim, shallverify the same by therecords of his Office, and if found to be correct and in accordance with law, shall certifythe same to the Commissioner with his recommendation together with all necessarypapers and documents. Upon receipt by the Commissioner of such certified claim he shallcause the same to be paid if found correct."

It is clear from the foregoing provision of the Tariff and Customs Code that in all claims forrefund of customs duties, the Collectorto whom such customs duties are paid and uponreceiptof such claim is mandated to verify the same by the records of his Office. If such claim isfound correct and in accordance with law, the Collectorshall certify the same to theCommissionerwith his recommendation together with all, the necessary papers and documents.This is precisely one of the reasons why the Court of Appeals upheld the dismissal of the case onthe ground that the CTA's jurisdiction14 under the Tariff and Customs Code is not concurrent


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with that of the respondent Commissioner of Customs due to the absence of any certificationfrom the Collector of Customs of Mani]a. Accordingly, petitioner's contention that its claims forrefund of alleged overpayment of customs duties may be deemed established from the findingsof the tax court in C.T.A. Case No. 4114 on the Advance Sales Tax is not necessarily corrupt inthe light of the above-cited provision of the Tariff and Customs Code.

"Customs duties"is 'the name given to taxes on the importation and exportation ofcommodities, the tariff or tax assessed upon merchandise imported from, or exported to, aforeign country.15 Any claim, for refund of customs duties, therefore, take the nature of taxexemptions that must be construedstrictissimi juris against the claimants and liberal]y in favorof the taxing authority.16 This power of taxation being a high prerogative of sovereignty, itsrelinquishment is never presumed. Any reduction or diminution thereof with respect to its modeor its rate must be strictly construed, and the same must be couched in clear and unmistakableterms in order that it may be applied.17

Thus, any outright award for the refund of allegedly overpaid customs duties in favor of

petitioner on its subject sixteen (16) importations is not favored in this jurisdiction unless there isa direct and clear finding thereon. The fact alone that the tax court, in C.T.A Case No. 4114, hasawarded in favor of the petitioner the refund of overpaid Advance Sales Tax involving the samesixteen (16) importations does not in any way excuse the petitioner from proving its claims forrefund of alleged over payment of customs duties. We have scrutulized the decision rendered bythe tax court C.T.A. Case No. 4114 and found no clear indication therein that the tax court hasruled on petitioner's claims for alleged overpayment of customs duties.

The petitioner is mistaken in its contention that its claims for refund of allegedly overpaidcustoms duties are governed by Article 215418 of the New Civil Code on quasi-contract, or therule onsolutio indebiti, which prescribes in six (6) years pursuant to Article 1145 of the same

Code.

Sections 2308 and 2309 of the Tariff and Customs Code provide that:

"Sec. 2308.Protest and Payment upon Protest in Civil Matter:When a ruling ordecision of the collector is made whereby liability for duties , taxes, fees, or othercharges are determined, except the fixing of fines in seizures cases, the party adverselyaffected may protest such ruling or decisionby presenting to the Collectorat the timewhen payment of the amount claimed to be due the governmentis made, or withinfifteen (15) days thereafter, a written protest setting forth his objection to the rulingor decision in question, together with the reasons therefor. No protest shall beconsidered unless payment of the amount due after final liquidation has first beenmade and the corresponding docket fee, as provided for in Section 3301."

"Sec. 2309.Protest Exclusive Remedy in Protestable Case. In all cases subject toprotest, the interested party who desires to have the action of the collectorreviewed,shallmake a protest, otherwise, the action of the collector shall be finaland conclusive against him, x x x. "


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"SEC. 2312. Decision or Action by the collector in Protest and Seizure Cases. When aprotest in a proper form is presented in a case where protest is required, thecollector shallissue an order for hearing with in fi fteen (15) days fr om receipt of theprotest and hear the matter thus presented. Upon termination of the hearing, theCollector shallrender a decision within thirty (30) days, and if the protest is sustained,

in whole or in part, he shall make the appropriate order, the entry reliquidated necessary,xxx,"

In the light of the abovecited provisions of the Tariff and Customs Code, it appears that in allcases subject to protest, the claim for refund of customs duties may be foreclosed only when theinterested party claiming refund fails to file a written protest before the Collector of Customs.This written protest which must set forth the claimant's objection to the ruling or decision inquestion together with the reasons therefor must be made either at the time when payment of theamount claimed to be due the government is made or within fifteen (15) days thereafter. Inconjunction with this right of the claimant is the duty of the Collector of Customs to hear anddecide such protest in accordance and within the period of time prescribed by the law.

Accordingly, once a written protest is seasonably filed with the Collector of Customs the failureor inaction of the latter to promptly perform his mandated duty under the Tariff and CustomsCode should not be allowed to prejudice the right of the party adversely affected thereby.Technicalities and legalisms, however exalted, should not be misused by the government to keepmoney not belonging to it, if any is proven, and thereby enrich itself at the expense of the taxpayers. If the State expects its taxpayers to observe fairness and honesty in paying their taxes, somust it apply the same standard against itself in refunding excess payments, if any, of such taxes.Indeed the State must lead by its own example of honor, dignity and uprightness.

Here, it is undisputed that the inaction of the Collector of Customs of Manila for nearly six (6)

years on the protests seasonably filed by the petitioner has caused the latter to immediately resortto the CTA. The petitioner did so on the mistaken belief that its claims are governed by the ruleon quasi-contract orsolutio indebiti which prescribes in six (6) years under Article 1145 of theNew Civil Code.

This belief or contention of the petitioner is misplaced. In order for the rule on solutionindebiti to apply it is an essential condition that petitioner must first show that its payment of thecustoms duties was in "excess of what was required by the law at the time when the subjectsixteen (16) importations of milk and milk products were made. Unless shown otherwise, thedisputable presumption of regularity of performance of duty lies in favor of the Collector ofCustoms.

In the present case, there is no factual showing that the collection of the alleged overpaidcustoms duties was more than what is required of the petitioner when it made the aforesaidseparate importations. There is no factual finding yet by the government agency concerned thatpetitioner is indeed entitled to its claim of overpayment and, if true, for how much it is entitled. Itbears stress that in determining whether or not petitioner is entitled to refund of allegedoverpayment of customs duties, it is necessary to determine exactly how much the Governmentis entitled to collect as customs duties on the importations. Thus, it would only be just and fair


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that the petitioner-taxpayer and the Government alike be given equal opportunities to avail of theremedies under the law to contest or defeat each other's claim and to determine all matters ofdispute between them in one single case.19 If the State expects its taxpayers to observe fairnessand honesty in paying their taxes, so must it apply the same standard against itself in refundingexcess payments, if truly proven, of such taxes. Indeed, the State must lead by its own example

of honor, dignity and uprightness.

The ratiocination of the Court of Appeals is in accord with a ruling of this Court which isapplicable to the case at bar, to wit:

"As stated by the respondent court in its Resolution dated January 6, 1997,the petitioner's claim cannot be deemed to prescribe because the Collector ofCustoms has not acted on the protest, and the period for filling an appeal to theCommissioner of Customs has not commenced to run. Moreover, delay or inaction ofa subordinate official, does not constitute an exception to the afore-cited principle as thedelay should be brought to the attention of a superior administrative officer for immediate

adjudication (Commissioner of Immigration vs. Vamenta, Jr., 54 SCRA 342; Barte vs.Dichoso, 47 SCRA 77)."

WHEREFORE, the assailed Decision dated September 23,1997 of the Court of Appeals in CA-G.R SF No. 43188 is hereby SETASIDE; and C.T.A. Case No. 4478is REINSTATED and REMANDED to the Court of Tax Appeals for hearing and reception ofevidence relative to petitioner's claims for refund of alleged overpayment of customs duties. TheCourt of Tax Appeals is directed to dispose of the said case with dispatch.1wphi1.nt

SO ORDERED.


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CASE 22

G.R. Nos. 167274-75 July 21, 2008

COMMISSIONER OF INTERNAL REVENUE, Petitioner,

vs.FORTUNE TOBACCO CORPORATION, Respondent.

D E C I S I O N

TINGA, J.:

Simple and uncomplicated is the central issue involved, yet whopping is the amount at stake inthis case.

After much wrangling in the Court of Tax Appeals (CTA) and the Court of Appeals, Fortune

Tobacco Corporation (Fortune Tobacco) was granted a tax refund or tax credit representingspecific taxes erroneously collected from its tobacco products. The tax refund is being re-claimedby the Commissioner of Internal Revenue (Commissioner) in this petition.

The following undisputed facts, summarized by the Court of Appeals, are quoted in the assailedDecision1dated 28 September 2004:

CAG.R. SP No. 80675

x x x x

Petitioner

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is a domestic corporation duly organized and existing under and by virtue of the lawsof the Republic of the Philippines, with principal address at Fortune Avenue, Parang, MarikinaCity.

Petitioner is the manufacturer/producer of, among others, the following cigarette brands, with taxrate classification based on net retail price prescribed by Annex "D" to R.A. No. 4280, to wit:

Brand Tax Rate

Champion M 100 P1.00

Salem M 100 P1.00

Salem M King P1.00

Camel F King P1.00

Camel Lights Box 20s P1.00

Camel Filters Box 20s P1.00
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Winston F Kings P5.00

Winston Lights P5.00

Immediately prior to January 1, 1997, the above-mentioned cigarette brands were subject to ad

valorem tax pursuant to then Section 142 of the Tax Code of 1977, as amended. However, onJanuary 1, 1997, R.A. No. 8240 took effect whereby a shift from the ad valorem tax (AVT)system to the specific tax system was made and subjecting the aforesaid cigarette brands tospecific tax under [S]ection 142 thereof, now renumbered as Sec. 145 of the Tax Code of 1997,pertinent provisions of which are quoted thus:

Section 145. Cigars and Cigarettes-

(A) Cigars. There shall be levied, assessed and collected on cigars a tax of One peso(P1.00) per cigar.

"(B) Cigarettes packed by hand. There shall be levied, assessesed and collected oncigarettes packed by hand a tax of Forty centavos (P0.40) per pack.

(C) Cigarettes packed by machine. There shall be levied, assessed and collected oncigarettes packed by machine a tax at the rates prescribed below:

(1) If the net retail price (excluding the excise tax and the value-added tax) isabove Ten pesos (P10.00) per pack, the tax shall be Twelve (P12.00) per pack;

(2) If the net retail price (excluding the excise tax and the value addedtax) exceeds Six pesos and Fifty centavos (P6.50) but does not exceed Ten pesos

(P10.00) per pack, the tax shall be Eight Pesos (P8.00) per pack.

(3) If the net retail price (excluding the excise tax and the value-added tax) is Fivepesos (P5.00) but does not exceed Six Pesos and fifty centavos (P6.50) per pack,the tax shall be Five pesos (P5.00) per pack;

(4) If the net retail price (excluding the excise tax and the value-added tax) isbelow Five pesos (P5.00) per pack, the tax shall be One peso (P1.00) per pack;

"Variants of existing brands of cigarettes which are introduced in the domestic market after theeffectivity of R.A. No. 8240 shall be taxed under the highest classification of any variant of that

brand.

The excise tax from any brand of cigarettes within the next three (3) years from the effectivity ofR.A. No. 8240 shall not be lower than the tax, which is due from each brand on October 1, 1996.Provided, however, that in cases were (sic) the excise tax rate imposed in paragraphs (1), (2), (3)and (4) hereinabove will result in an increase in excise tax of more than seventy percent (70%),for a brand of cigarette, the increase shall take effect in two tranches: fifty percent (50%) of the


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increase shall be effective in 1997 and one hundred percent (100%) of the increase shall beeffective in 1998.

Duly registered or existing brands of cigarettes or new brands thereof packed by machine shallonly be packed in twenties.

The rates of excise tax on cigars and cigarettes under paragraphs (1), (2) (3) and (4) hereof,shall be increased by twelve percent (12%) on January 1, 2000. (Emphasis supplied)

New brands shall be classified according to their current net retail price.

For the above purpose, net retail price shall mean the price at which the cigarette is sold onretail in twenty (20) major supermarkets in Metro Manila (for brands of cigarettes marketednationally), excluding the amount intended to cover the applicable excise tax and value-addedtax. For brands which are marketed only outside Metro [M]anila, the net retail price shallmean the price at which the cigarette is sold in five (5) major supermarkets in the region

excluding the amount intended to cover the applicable excise tax and the value-added tax.

The classification of each brand of cigarettes based on its average retail price as of October 1,1996, as set forth in Annex "D," shall remain in force until revised by Congress.

Variant of a brand shall refer to a brand on which a modifier is prefixed and/or suffixed to theroot name of the brand and/or a different brand which carries the same logo or design of theexisting brand.

To implement the provisions for a twelve percent (12%) increase of excise tax on, among others,cigars and cigarettes packed by machines by January 1, 2000, the Secretary of Finance, upon

recommendation of the respondent Commissioner of Internal Revenue, issued RevenueRegulations No. 17-99, dated December 16, 1999, which provides the increase on the applicabletax rates on cigar and cigarettes as follows:

SECTION ARTICLESPRESENT SPECIFICTAX RATE PRIORTO JAN. 1, 2000

NEW SPECIFIC TAXRATE EFFECTIVEJAN. 1, 2000

145 (A) P1.00/cigar P1.12/cigar

(B)Cigarettes packed bymachine

(1) Net retail price(excluding VAT and excise)exceeds P10.00 per pack

P12.00/pack P13.44/ pack

(2) Exceeds P10.00 per pack P8.00/pack P8.96/pack

(3) Net retail price(excluding VAT and excise)

P5.00/pack P5.60/pack


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is P5.00 to P6.50 per pack

(4) Net Retail Price(excluding VAT and excise)is below P5.00 per pack


Revenue Regulations No. 17-99 likewise provides in the last paragraph of Section 1 thereof,"(t)hat the new specific tax rate for any existing brand of cigars, cigarettes packed bymachine, distilled spirits, wines and fermented liquor shall not be lower than the excise taxthat is actually being paid prior to January 1, 2000."

For the period covering January 1-31, 2000, petitioner allegedly paid specific taxes on all brandsmanufactured and removed in the total amounts of P585,705,250.00.

On February 7, 2000, petitioner filed with respondents Appellate Division a claim for refund ortax credit of its purportedly overpaid excise tax for the month of January 2000 in the amount

of P35,651,410.00

On June 21, 2001, petitioner filed with respondents Legal Service a letter dated June 20, 2001reiterating all the claims for refund/tax credit of its overpaid excise taxes filed on various dates,including the present claim for the month of January 2000 in the amount of P35,651,410.00.

As there was no action on the part of the respondent, petitioner filed the instant petition forreview with this Court on December 11, 2001, in order to comply with the two-year period forfiling a claim for refund.

In his answer filed on January 16, 2002, respondent raised the following Special and Affirmative

Defenses;

4. Petitioners alleged claim for refund is subject to administrative routinaryinvestigation/examination by the Bureau;

5. The amount of P35,651,410 being claimed by petitioner as alleged overpaid excise taxfor the month of January 2000 was not properly documented.

6. In an action for tax refund, the burden of proof is on the taxpayer to establish its rightto refund, and failure to sustain the burden is fatal to its claim for refund/credit.

7. Petitioner must show that it has complied with the provisions of Section 204(C) inrelation [to] Section 229 of the Tax Code on the prescriptive period for claiming taxrefund/credit;

8. Claims for refund are construed strictly against the claimant for the same partake of taxexemption from taxation; and


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9. The last paragraph of Section 1 of Revenue Regulation[s] [No.]17-99 is a validimplementing regulation which has the force and effect of law."

CA G.R. SP No. 83165

The petition contains essentially similar facts, except that the said case questions the CTAs December 4, 2003 decision in CTA Case No. 6612 granting respondents3claim for refund of theamount of P355,385,920.00 representing erroneously or illegally collected specific taxescovering the period January 1, 2002 to December 31, 2002, as well as its March 17, 2004Resolution denying a reconsideration thereof.

x x x x

In both CTA Case Nos. 6365 & 6383 and CTA No. 6612, the Court of Tax Appeals reduced theissues to be resolved into two as stipulated by the parties, to wit: (1) Whether or not the lastparagraph of Section 1 of Revenue Regulation[s] [No.] 17-99 is in accordance with the pertinent

provisions of Republic Act [No.] 8240, now incorporated in Section 145 of the Tax Code of1997; and (2) Whether or not petitioner is entitled to a refund ofP35,651,410.00 as allegedoverpaid excise tax for the month of January 2000.

x x x x

Hence, the respondent CTA in its assailed October 21, 2002 [twin] Decisions[s] disposed in CTACase Nos. 6365 & 6383:

WHEREFORE, in view of the foregoing, the court finds the instant petition meritorious and inaccordance with law. Accordingly, respondent is hereby ORDERED to REFUND to petitioner

the amount of P35,651.410.00 representing erroneously paid excise taxes for the period January1 to January 31, 2000.

SO ORDERED.

Herein petitioner sought reconsideration of the above-quoted decision. In [twin] resolution[s][both] dated July 15, 2003, the Tax Court, in an apparent change of heart, granted the petitionersconsolidated motions for reconsideration, thereby denying the respondents claim for refund.

However, on consolidated motions for reconsideration filed by the respondent in CTA Case Nos.6363 and 6383, the July 15, 2002 resolution was set aside, and the Tax Court ruled, this time

with a semblance of finality, that the respondent is entitled to the refund claimed. Hence, in aresolution dated November 4, 2003, the tax court reinstated its December 21, 2002 Decision anddisposed as follows:

WHEREFORE, our Decisions in CTA Case Nos. 6365 and 6383 are hereby REINSTATED.Accordingly, respondent is hereby ORDERED to REFUND petitioner the total amountof P680,387,025.00 representing erroneously paid excise taxes for the period January 1, 2000 toJanuary 31, 2000 and February 1, 2000 to December 31, 2001.
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SO ORDERED.

Meanwhile, on December 4, 2003, the Court of Tax Appeals rendered decision in CTA Case No.6612 granting the prayer for the refund of the amount of P355,385,920.00 representing overpaidexcise tax for the period covering January 1, 2002 to December 31, 2002. The tax court disposed

of the case as follows:

IN VIEW OF THE FOREGOING, the Petition for Review is GRANTED. Accordingly,respondent is hereby ORDERED to REFUND to petitioner the amount of P355,385,920.00representing overpaid excise tax for the period covering January 1, 2002 to December 31, 2002.

SO ORDERED.

Petitioner sought reconsideration of the decision, but the same was denied in a Resolution datedMarch 17, 2004.4(Emphasis supplied) (Citations omitted)

The Commissioner appealed the aforesaid decisions of the CTA. The petition questioning thegrant of refund in the amount of P680,387,025.00 was docketed as CA-G.R. SP No. 80675,whereas that assailing the grant of refund in the amount of P355,385,920.00 was docketed asCA-G.R. SP No. 83165. The petitions were consolidated and eventually denied by the Court ofAppeals. The appellate court also denied reconsideration in its Resolution5dated 1 March 2005.

In its Memorandum622 dated November 2006, filed on behalf of the Commissioner, the Officeof the Solicitor General (OSG) seeks to convince the Court that the literal interpretation given bythe CTA and the Court of Appeals of Section 145 of the Tax Code of 1997 (Tax Code) wouldlead to a lower tax imposable on 1 January 2000 than that imposable during the transition period.Instead of an increase of 12% in the tax rate effective on 1 January 2000 as allegedly mandated

by the Tax Code, the appellate courts ruling would result in a significant decrease in the tax rateby as much as 66%.

The OSG argues that Section 145 of the Tax Code admits of several interpretations, such as:

1. That by January 1, 2000, the excise tax on cigarettes should be the higher tax imposedunder the specific tax system and the tax imposed under the ad valorem tax system plusthe 12% increase imposed by par. 5, Sec. 145 of the Tax Code;

2. The increase of 12% starting on January 1, 2000 does not apply to the brands ofcigarettes listed under Annex "D" referred to in par. 8, Sec. 145 of the Tax Code;

3. The 12% increment shall be computed based on the net retail price as indicated in par.C, sub-par. (1)-(4), Sec. 145 of the Tax Code even if the resulting figure will be lowerthan the amount already being paid at the end of the transition period. This is theinterpretation followed by both the CTA and the Court of Appeals.7

This being so, the interpretation which will give life to the legislative intent to raise revenueshould govern, the OSG stresses.
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Finally, the OSG asserts that a tax refund is in the nature of a tax exemption and must, therefore,be construed strictly against the taxpayer, such as Fortune Tobacco.

In its Memorandum8dated 10 November 2006, Fortune Tobacco argues that the CTA and theCourt of Appeals merely followed the letter of the law when they ruled that the basis for the 12%

increase in the tax rate should be the net retail price of the cigarettes in the market as outlined inparagraph C, sub paragraphs (1)-(4), Section 145 of the Tax Code. The Commissioner allegedlyhas gone beyond his delegated rule-making power when he promulgated, enforced andimplemented Revenue Regulation No. 17-99, which effectively created a separate classificationfor cigarettes based on the excise tax "actually being paid prior to January 1, 2000."9

It should be mentioned at the outset that there is no dispute between the fact of payment of thetaxes sought to be refunded and the receipt thereof by the Bureau of Internal Revenue (BIR).There is also no question about the mathematical accuracy of Fortune Tobaccos claim since the

documentary evidence in support of the refund has not been controverted by the revenue agency.Likewise, the claims have been made and the actions have been filed within the two (2)-year

prescriptive period provided under Section 229 of the Tax Code.

The power to tax is inherent in the State, such power being inherently legislative, based on theprinciple that taxes are a grant of the people who are taxed, and the grant must be made by theimmediate representatives of the people; and where the people have laid the power, there it mustremain and be exercised.10

This entire controversy revolves around the interplay between Section 145 of the Tax Code andRevenue Regulation 17-99. The main issue is an inquiry into whether the revenue regulation hasexceeded the allowable limits of legislative delegation.

For ease of reference, Section 145 of the Tax Code is again reproduced in full as follows:

Section 145. Cigars and Cigarettes-

(A) Cigars.There shall be levied, assessed and collected on cigars a tax of One peso(P1.00) per cigar.

(B). Cigarettes packed by hand.There shall be levied, assessed and collected oncigarettes packed by hand a tax of Forty centavos (P0.40) per pack.

(C) Cigarettes packed by machine.There shall be levied, assessed and collected on

cigarettes packed by machine a tax at the rates prescribed below:

(1) If the net retail price (excluding the excise tax and the value-added tax) isabove Ten pesos (P10.00) per pack, the tax shall be Twelve pesos (P12.00) perpack;
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Revenue Regulation 17-99, which was issued pursuant to the unquestioned authority of theSecretary of Finance to promulgate rules and regulations for the effective implementation of theTax Code,12interprets the above-quoted provision and reflects the 12% increase in excise taxesin the following manner:

SECTIONDESCRIPTION OFARTICLES

PRESENT SPECIFICTAX RATES PRIORTO JAN. 1, 2000

NEW SPECIFICTAX RATEEffective Jan.. 1,2000

145 (A) P1.00/cigar P1.12/cigar

(B)Cigarettes packed byMachine

(1) Net Retail Price(excluding VAT and Excise)exceeds P10.00 per pack


(2) Net Retail Price(excluding VAT and Excise)is P6.51 up to P10.00 perpack


(3) Net Retail Price(excluding VAT and excise)is P5.00 to P6.50 per pack


(4) Net Retail Price(excluding VAT and excise)

is below P5.00 per pack)


This table reflects Section 145 of the Tax Code insofar as it mandates a 12% increase effectiveon 1 January 2000 based on the taxes indicated under paragraph C, sub-paragraph (1)-(4).However, Revenue Regulation No. 17-99 went further and added that "[T]he new specific taxrate for any existing brand of cigars, cigarettes packed by machine, distilled spirits, wines andfermented liquorshall not be lower than the excise tax that is actually being paid prior toJanuary 1, 2000."13

Parenthetically, Section 145 states that during the transition period, i.e., within the next three (3)years from the effectivity of the Tax Code, the excise tax from any brand of cigarettes shall not

be lower than the tax due from each brand on 1 October 1996. This qualification, however, isconspicuously absent as regards the 12% increase which is to be applied on cigars and cigarettespacked by machine, among others, effective on 1 January 2000. Clearly and unmistakably,Section 145 mandates a new rate of excise tax for cigarettes packed by machine due to the 12%increase effective on 1 January 2000 without regard to whether the revenue collection startingfrom this period may turn out to be lower than that collected prior to this date.
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never intended to treat pawnshops in the same way as lending investors; and that the particularlyinvolved section of the Tax Code explicitly subjected lending investors and dealers in securitiesonly to percentage tax. And so the Court affirmed the invalidity of the challenged circulars,stressing that "administrative issuances must not override, supplant or modify the law, but mustremain consistent with the law they intend to carry out."19

InPhilippine Bank of Communications v. Commissioner of Internal Revenue,20the then actingCommissioner issued RMC 7-85, changing the prescriptive period of two years to ten years forclaims of excess quarterly income tax payments, thereby creating a clear inconsistency with theprovision of Section 230 of the 1977 Tax Code. The Court nullified the circular, ruling that theBIR did not simply interpret the law; rather it legislated guidelines contrary to the statute passedby Congress. The Court held:

It bears repeating that Revenue memorandum-circulars are considered administrative rulings (inthe sense of more specific and less general interpretations of tax laws) which are issued fromtime to time by the Commissioner of Internal Revenue. It is widely accepted that the

interpretation placed upon a statute by the executive officers, whose duty is to enforce it, isentitled to great respect by the courts. Nevertheless, such interpretation is not conclusive and willbe ignored if judicially found to be erroneous. Thus, courts will not countenance administrativeissuances that override, instead of remaining consistent and in harmony with, the law they seekto apply and implement.21

In Commissioner of Internal Revenue v. CA, et al.,22the central issue was the validity of RMO 4-87 which had construed the amnesty coverage under E.O. No. 41 (1986) to include onlyassessments issued by the BIR after the promulgation of the executive order on 22 August 1986and not assessments made to that date. Resolving the issue in the negative, the Court held:

x x x all such issuances must not override, but must remain consistent and in harmony with, thelaw they seek to apply and implement. Administrative rules and regulations are intended to carryout, neither to supplant nor to modify, the law.23

x x x

If, as the Commissioner argues, Executive Order No. 41 had not been intended to include 1981-1985 tax liabilities already assessed (administratively) prior to 22 August 1986, the law couldhave simply so provided in its exclusionary clauses. It did not. The conclusion is unavoidable,and it is that the executive order has been designed to be in the nature of a general grant of taxamnesty subject only to the cases specifically excepted by it .24

In the case at bar, the OSGs argument that by 1 January 2000, the excise tax on cigarettesshould be the higher tax imposed under the specific tax system and the tax imposed under the advalorem tax system plus the 12% increase imposed by paragraph 5, Section 145 of the Tax Code,is an unsuccessful attempt to justify what is clearly an impermissible incursion into the limits ofadministrative legislation. Such an interpretation is not supported by the clear language of thelaw and is obviously only meant to validate the OSGs thesis that Section 145 of the Tax Code isambiguous and admits of several interpretations.
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The contention that the increase of 12% starting on 1 January 2000 does not apply to the brandsof cigarettes listed under Annex "D" is likewise unmeritorious, absurd even. Paragraph 8,Section 145 of the Tax Code simply states that, "[T]he classification of each brand of cigarettesbased on its average net retail price as of October 1, 1996, as set forth in Annex D, shall remain

in force until revised by Congress." This declaration certainly does not lend itself to the

interpretation given to it by the OSG. As plainly worded, the average net retail prices of thelisted brands under Annex "D," which classify cigarettes according to their net retail price intolow, medium or high, obviously remain the bases for the application of the increase in excise taxrates effective on 1 January 2000.

The foregoing leads us to conclude that Revenue Regulation No. 17-99 is indeed indefensiblyflawed. The Commissioner cannot seek refuge in his claim that the purpose behind the passageof the Tax Code is to generate additional revenues for the government. Revenue generation hasundoubtedly been a major consideration in the passage of the Tax Code. However, as borne bythe legislative record,25the shift from the ad valorem system to the specific tax system islikewise meant to promote fair competition among the players in the industries concerned, to

ensure an equitable distribution of the tax burden and to simplify tax administration byclassifying cigarettes, among others, into high, medium and low-priced based on their net retailprice and accordingly graduating tax rates.

At any rate, this advertence to the legislative record is merely gratuitous because, as we haveheld, the meaning of the law is clear on its face and free from the ambiguities that theCommissioner imputes. We simply cannot disregard the letter of the law on the pretext ofpursuing its spirit.26

Finally, the Commissioners contention that a tax refund partakes the nature of a tax exemptiondoes not apply to the tax refund to which Fortune Tobacco is entitled. There is parity between tax

refund and tax exemption only when the former is based either on a tax exemption statute or atax refund statute. Obviously, that is not the situation here. Quite the contrary, Fortune Tobaccosclaim for refund is premised on its erroneous payment of the tax, or better still the governmentsexaction in the absence of a law.

Tax exemption is a result of legislative grace. And he who claims an exemption from the burdenof taxation must justify his claim by showing that the legislature intended to exempt him bywords too plain to be mistaken.27The rule is that tax exemptions must be strictly construed suchthat the exemption will not be held to be conferred unless the terms under which it is grantedclearly and distinctly show that such was the intention.28

A claim for tax refund may be based on statutes granting tax exemption or tax refund. In suchcase, the rule of strict interpretation against the taxpayer is applicable as the claim for refundpartakes of the nature of an exemption, a legislative grace, which cannot be allowed unlessgranted in the most explicit and categorical language. The taxpayer must show that thelegislature intended to exempt him from the tax by words too plain to be mistaken.29

Tax refunds (or tax credits), on the other hand, are not founded principally on legislative gracebut on the legal principle which underlies all quasi-contracts abhorring a persons unjust
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enrichment at the expense of another.30The dynamic of erroneous payment of tax fits to a tee theprototypic quasi-contract, solutio indebiti, which covers not only mistake in fact but also mistakein law.31

The Government is not exempt from the application of solutio indebiti.32Indeed, the taxpayer

expects fair dealing from the Government, and the latter has the duty to refund without anyunreasonable delay what it has erroneously collected.33If the State expects its taxpayers toobserve fairness and honesty in paying their taxes, it must hold itself against the same standard inrefunding excess (or erroneous) payments of such taxes. It should not unjustly enrich itself at theexpense of taxpayers.34And so, given its essence, a claim for tax refund necessitates onlypreponderance of evidence for its approbation like in any other ordinary civil case.

Under the Tax Code itself, apparently in recognition of the pervasive quasi-contract principle, aclaim for tax refund may be based on the following: (a) erroneously or illegally assessed orcollected internal revenue taxes; (b) penalties imposed without authority; and (c) any sumalleged to have been excessive or in any manner wrongfully collected.35

What is controlling in this case is the well-settled doctrine of strict interpretation in theimposition of taxes, not the similar doctrine as applied to tax exemptions. The rule in theinterpretation of tax laws is that a statute will not be construed as imposing a tax unless it does soclearly, expressly, and unambiguously. A tax cannot be imposed without clear and express wordsfor that purpose. Accordingly, the general rule of requiring adherence to the letter in construingstatutes applies with peculiar strictness to tax laws and the provisions of a taxing act are not to beextended by implication. In answering the question of who is subject to tax statutes, it is basicthat in case of doubt, such statutes are to be construed most strongly against the government andin favor of the subjects or citizens because burdens are not to be imposed nor presumed to beimposed beyond what statutes expressly and clearly import.36As burdens, taxes should not be

unduly exacted nor assumed beyond the plain meaning of the tax laws.

37

WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals in CA G.R. SPNo. 80675, dated 28 September 2004, and its Resolution, dated 1 March 2005, are AFFIRMED.No pronouncement as to costs.

SO ORDERED.
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CASE 23

G.R. No. 146807 May 9, 2002

PADCOM CONDOMINIUM CORPORATION,petitioner,

vs.ORTIGAS CENTER ASSOCIATION, INC., respondent.

DAVIDE, JR., C.J.:

Challenged in this case is the 30 June 2000 decision1 of the Court of Appeals in CA-G.R. CVNo. 60099, reversing and setting aside the 1 September 1997 decision2 of the Regional TrialCourt of Pasig City, Branch 264, in Civil Case No. 63801.3

Petitioner Padcom Condominium Corporation (hereafter PADCOM) owns and manages thePadilla Office Condominium Building (PADCOM Building) located at Emerald Avenue, Ortigas

Center, Pasig City. The land on which the building stands was originally acquired from theOrtigas & Company, Limited Partnership (OCLP), by Tierra Development Corporation (TDC)under a Deed of Sale dated 4 September 1974. Among the terms and conditions in the deed ofsale was the requirement that the transferee and its successor-in-interest must become membersof an association for realty owners and long-term lessees in the area later known as the OrtigasCenter. Subsequently, the said lot, together with improvements thereon, was conveyed by TDCin favor of PADCOM in a Deed of Transfer dated 25 February 1975.4

In 1982, respondent Ortigas Center Association, Inc. (hereafter the Association) was organizedto advance the interests and promote the general welfare of the real estate owners and long-termlessees of lots in the Ortigas Center. It sought the collection of membership dues in the amount

of two thousand seven hundred twenty-four pesos and forty centavos (P2,724.40) per monthfrom PADCOM. The corporate books showed that PADCOM owed theAssociation P639,961.47, representing membership dues, interests and penalty charges fromApril 1983 to June 1993.5 The letters exchanged between the parties through the years showedrepeated demands for payment, requests for extensions of payment, and even a settlementscheme proposed by PADCOM in September 1990.

In view of PADCOMs failure and refusal to pay its arrears in monthly dues, including interests

and penalties thereon, the Association filed a complaint for collection of sum of money beforethe trial court below, which was docketed as Civil Case No. 63801. The Association averred thatpurchasers of lands within the Ortigas Center complex from OCLP are obligated under theircontracts of sale to become members of the Association. This obligation was allegedly passed onto PADCOM when it bought the lot from TDC, its predecessor-in-interest.6

In its answer, PADCOM contended that it is a non-stock, non-profit association, and for it tobecome a special member of the Association, it should first apply for and be accepted formembership by the latters Board of Directors. No automatic membership was apparently

contemplated in the Associations By-laws. PADCOM added that it could not be compelled to


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become a member without violating its right to freedom of association. And since it was not amember of the Association, it was not liable for membership dues, interests and penalties.7

During the trial, the Association presented its accountant as lone witness to prove that PADCOMwas, indeed, one of its members and, as such, did not pay its membership dues.1wphi1.nt

PADCOM, on the other hand, did not present its evidence; instead it filed a motion to dismiss byway of demurrer to evidence. It alleged that the facts established by the Association showed noright to the reliefprayed for. It claimed that the provisions of the Associations By-laws and theDeed of Transfer did not contemplate automatic membership. Rather, the owner or long-termlessee becomes a member of the Association only after applying with and being accepted by itsBoard of Directors. Assuming further that PADCOM was a member of the Association, the latterfailed to show that the collection of monthly dues was a valid corporate act duly authorized by aproper resolution of the Associations Board of Directors.8

After due consideration of the issues raised in the motion to dismiss, the trial court rendered a

decision dismissing the complaint.

9

The Association appealed the case to the Court of Appeals, which docketed the appeal as CA-G.R. CV No. 60099. In its decision10 of 30 June 2000, the Court of Appeals reversed and setaside the trial courts dismissal of Civil Case No. 63801, and decreed as follows:

WHEREFORE, the appealed decision dated September 1, 1997is REVERSED and SETASIDE and, in lieu thereof, a new one is entered ordering theappellee (PADCOM) to pay the appellant (the Association) the following:

1) P639,961.47 as and for membership dues in arrears inclusive of earned interests and

penalties; and

2) P25,000.00 as and for attorneys fees.

Costs against the appellees.

SO ORDERED.

The Court of Appeals justified its ruling by declaring that PADCOM automatically became amember of the Association when the land was sold to TDC. The intent to pass the obligation toprospective transferees was evident from the annotation of the same clause at the back of the

Transfer Certificate of Title covering the lot. Despite disavowal of membership, PADCOMsmembership in the Association was evident from these facts: (1) PADCOM was included in theAssociations list ofbona fide members as of 30 March 1995; (2) Narciso Padilla, PADCOMsPresident, was one of the Associations incorporators; and (3) having received the demands forpayment, PADCOM not only acknowledged them, but asked for and was granted repeatedextensions, and even proposed a scheme for the settlement of its obligation. The Court ofAppeals also ruled that PADCOM cannot evade payment of its obligation to the Associationwithout violating equitable principles underlying quasi-contracts. Being covered by the


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It is undisputed that when the land in question was bought by PADCOMs predecessor-in-interest, TDC, from OCLP, the sale bound TDC to comply with paragraph (G) of the covenants,conditions and restrictions of the Deed of Sale, which reads as follows:13

G. AUTOMATIC MEMBERSHIP WITH THE ASSOCIATION:

The owner of this lot, its successor-in-interest hereby binds himself to become a memberof the ASSOCIATION which will be formed by and among purchasers, fully paid up LotBUYERS, Building Owners and the COMPANY in respect to COMPANY OWNEDLOTS.

The OWNER of this lot shall abide by such rules and regulations that shall be laid downby the ASSOCIATION in the interest of security, maintenance, beautification andgeneral welfare of the OFFICE BUILDING zone. The ASSOCIATION when organizedshall also, among others, provide for and collect assessments which shall constitute a lienon the property, junior only to liens of the Government for taxes.

Evidently, it was agreed by the parties that dues shall be collected from an automatic memberand such fees or assessments shall be a lien on the property.

This stipulation was likewise annotated at the back of Transfer Certificate of Title No. 457308issued to TDC.14And when the latter sold the lot to PADCOM on 25 February 1975, the Deed ofTransfer expressly stated:15

NOW, THEREFORE, for and in consideration of the foregoing premises, theDEVELOPER, by these presents, cedes, transfers and conveys unto the CORPORATIONthe above-described parcel of land evidenced by Transfer Certificate of Title No. 457308,

as well as the Common and Limited Common Areas of the Condominium projectmentioned and described in the Master Deed with Declaration of Restrictions (Annex "A"hereof), free from all liens and encumbrances, except those already annotated at the backof said Transfer Certificate of Title No. 457308, xxx

This is so because any lien annotated on previous certificates of title should be incorporated in orcarried over to the new transfer certificates of title. Such lien is inseparable from the property asit is a right in rem, a burden on the property whoever its owner may be. It subsistsnotwithstanding a change in ownership; in short, the personality of the owner isdisregarded.16 As emphasized earlier, the provision on automatic membership was annotated inthe Certificate of Title and made a condition in the Deed of Transfer in favor of PADCOM.Consequently, it is bound by and must comply with the covenant.1wphi1.nt

Moreover, Article 1311 of the Civil Code provides that contracts take effect between the parties,their assigns and heirs. Since PADCOM is the successor-in-interest of TDC, it follows that thestipulation on automatic membership with the Association is also binding on the former.


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We are not persuaded by PADCOMs contention that the By-laws of the Association requiresapplication for membership and acceptance thereof by the Board of Directors. Section 2 of theBy-laws17 reads:

Section 2.Regular Members. Upon acceptance by the Board of Directors of Ortigas

Center Association, Inc., all real estate owners, or long-term lessees of lots within theboundaries of the Association as defined in the Articles of Incorporation become regularmembers, provided, however that the long-term lessees of a lot or lots in said area shallbe considered as the regular members in lieu of the owners of the same. Likewise, regularmembership in the Association automatically ceases upon the cessation of a member tobe an owner or long-term lessee of real estate in the area.

A lessee shall be considered a long-term lessee if his lease is in writing and for a periodof two (2) years or more. Membership of a long-term lessee in the Association shall beco-terminus with his legal possession (or his lease) of the lot/s in the area. Upon thelessees cessation of membership in the Association, the owner shall automatically

succeed the lessee as member thereat.

As lot owner, PADCOM is a regular member of the Association. No application for membershipis necessary. If at all, acceptance by the Board of Directors is a ministerial function consideringthat PADCOM is deemed to be a regular member upon the acquisition of the lot pursuant to theautomatic membership clause annotated in the Certificate of Title of the property and the Deedof Transfer.

Neither are we convinced by PADCOMs contention that the automatic membership clause is aviolation of its freedom of association. PADCOM was never forced to join the association. Itcould have avoided such membership by not buying the land from TDC. Nobody forced it to buy

the land when it bought the building with the annotation of the condition or lien on theCertificate of Title thereof and accepted the Deed. PADCOM voluntarily agreed to be bound byand respect the condition, and thus to join the Association.

In addition, under the principle of estoppel, PADCOM is barred from disclaiming membership inthe Association. In estoppel, a person, who by his act or conduct has induced another to act in aparticular manner, is barred from adopting an inconsistent position, attitude or course of conductthat thereby causes loss or injury to another.18

We agree with the Court of Appeals conclusion from the facts or circumstances it enumerated in

its decision and enumerated above that PADCOM is, indeed, a regular member of theAssociation. These facts and circumstances are sufficient grounds to apply the doctrine ofestoppel against PADCOM.

Having ruled that PADCOM is a member of the Association, it is obligated to pay its duesincidental thereto. Article 1159 of the Civil Code mandates:

Art. 1159. Obligations arising from contracts have the force of law between thecontracting parties and should be complied with in good faith.


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Assuming in gratis argumenti that PADCOM is not a member of the Association, it cannotevade payment without violating the equitable principles underlying quasi-contracts. Article2142 of the Civil Code provides:

Art. 2142. Certain lawful, voluntary and unilateral acts give rise to the juridical relation

of quasi-contract to the end that no one shall be unjustly enriched or benefited at theexpense of another.

Generally, it may be said that a quasi-contract is based on the presumed will or intent of theobligor dictated by equity and by the principles of absolute justice. Examples of these principlesare: (1) it is presumed that a person agrees to that which will benefit him; (2) nobody wants toenrich himself unjustly at the expense of another; or (3) one must do unto others what he wouldwant others to do unto him under the same circumstances.19

As resident and lot owner in the Ortigas area, PADCOM was definitely benefited by theAssociations acts and activities to promote the interests and welfare of those who acquire

property therein or benefit from the acts or activities of the Association.1wphi1.nt

Finally, PADCOMs argument that the collection of monthly dues has no basis since there was

no board resolution defining how much fees are to be imposed deserves scant consideration.Suffice it is to say that PADCOM never protested upon receipt of the earlier demands forpayment of membership dues. In fact, by proposing a scheme to pay its obligation, PADCOMcannot belatedly question the Associations authority to assess and collect the fees in accordance

with the total land area owned or occupied by the members, which finds support in a resolutiondated 6 November 1982 of the Associations incorporating directors

20 and Section 2 of its By-laws.21

WHEREFORE, the petition is hereby DENIED for lack of merit.

Costs against petitioner.

SO ORDERED.


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CASE 24

EDWARD V. LACSON, G.R. No. 150644Petitioner,

Present:

PUNO,J., Chairperson,- versus - SANDOVAL-GUTIERREZ,

CORONA,AZCUNA, andGARCIA,JJ.

MAOWEE DABAN LACSONand MAONAA DABAN Promulgated:LACSON, represented by their

mother and guardian ad-litem,LEA DABAN LACSON, August 28, 2006

Respondents.x-----------------------------------------------------------------------------------------x

D E C I S I O N

GARCIA, J.:

Petitioner Edward V. Lacson, father of the respondent sisters Maowee

Daban Lacson and Maonaa Daban Lacson and husband of their mother and

guardian ad-litem, LeaDaban Lacson, has come to this Court via this petition for

review under Rule 45 of the Rules of Court to seek the reversal and setting aside

of the Decision[1]dated July 13, 2001 of the Court of Appeals (CA) in CA-G.R. CV

No. 60203, as reiterated in its Resolution[2]of October 18, 2001 denying his motion

for reconsideration.

From the petition and its annexes, the respondents reply thereto, andother pleadings, the Court gathers the following facts:

The sisters Maowee Daban Lacson and Maonaa Daban Lacson are legitimate

daughters of petitioner Edward V. Lacson and his wife, Lea

Daban Lacson. Maowee was born on December 4, 1974, while Maonaa, a little less
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than a year later. Not long after the birth of Maonaa, petitioner left the conjugal

home in Molo, Iloilo City, virtually forcing mother and children to seek, apparently

for financial reason, shelter somewhere else. For a month, they stayed with Leas

mother-in-law, Alicia Lacson, then with her (Leas) mother and then with herbrother Noel Daban. After some time, they rented an apartment only to return later

to the house of Leas mother. As the trial court aptly observed, the sisters and their

mother, from 1976 to 1994, or for a period of eighteen (18) years, shuttled from

one dwelling place to another not their own.It appears that from the start of their estrangement, Lea did not badger her

husband Edward for support, relying initially on his commitment memorialized in

a note datedDecember 10, 1975 to give support to his daughters. As things turned

out, however, Edward reneged on his promise of support, despite Leas efforts

towards having him fulfill the same. Lea would admit, though, that Edward

occasionally gave their children meager amounts for school expenses. Through the

years and up to the middle part of 1992, Edwards mother, Alicia Lacson, also

gave small amounts to help in the schooling of Maowee and Maonaa, both of

whom eventually took up nursing at St. Pauls College in Iloilo City. In the early

part of 1995 when Lea, in behalf of her two daughters, filed a complaint against

Edward for support before the Regional Trial Court of Iloilo City, Branch 33,

Maowee was about to graduate.In that complaint dated January 30, 1995, as amended,[3]docketed as Civil

Case No. 22185, Maowee and Maonaa, thru their mother, averred that their father

Edward, despite being gainfully employed and owning several pieces of valuable

lands, has not provided them support since 1976. They also alleged that, owing to

years of Edwards failure and neglect, their mother had , from time to time,borrowed money from her brother Noel Daban. As she would later testify, Lea had

received from Noel, by way of a loan, as much as P400,000.00 to P600,000.00.

In his Answer, Edward alleged giving to Maowee and Maonaa sufficient

sum to meet their needs. He explained, however, that his lack of regular income
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and the unproductivity of the land he inherited, not his neglect, accounted for his

failure at times to give regular support. He also blamed financial constraint for his

inability to provide theP12,000.00 monthly allowance prayed for in the complaint.

As applied for and after due hearing, the trial court granted the sistersMaowee and Maonaa supportpendente lite at P12,000.00 per month, subject to the

schedule ofpayment and other conditions set forth in the courts corresponding

order of May 13, 1996.[4]

Following trial, the RTC rendered on June 26, 1997 judgment finding for the

plaintiff sisters, as represented by their mother. In that judgment, the trial court,

following an elaborate formula set forth therein, ordered their defendant

father Edward to pay them a specific sum which represented 216 months, or 18years, of support in arrears. Thefalloof the trial courts decision[5]reads:
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WHEREFORE, judgment is hereby rendered:

1) Ordering defendant to compensate plaintiffs support inarrears in the amount of TWO MILLION FOURHUNDRED NINETY-SIX THOUSAND (P2, 496,000.00)PESOS from which amount shall be deducted ONEHUNDRED TWENTY-FOUR (P124,000.00) PESOS thatwhich they received from defendant for two years and thatwhich they received by way of support pendent lite;

2) Ordering defendant to pay TWENTY THOUSAND(P20,000.00) PESOS as attorneys fees; and

3) Pay costs.

SO ORDERED.

Therefrom, Edward appealed to the CA whereat his recourse was docketed

as CA-G.R. CV. No. 60203.

Eventually, the CA, in the herein assailed Decision dated July 13,

2001,[6]dismissed Edwards appeal, disposing as follows;

WHEREFORE, premises considered, the present appeal is herebyDISMISSED and the appealed Decision in Civil Case No. 22185 is herebyAFFIRMED.

Double costs against the defendantappellant [Edward Lacson].

SO ORDERED. (Words in bracket added.)

In time, Edward moved for reconsideration, but his motion was denied by

the appellate court in its equally assailed Resolution of October 18, 2001.[7]

Hence, Edwards present recourse on his submission that the CA erred -
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I. XXX WHEN IT AFFIRMED THE GRANT OF SUPPORT IN

ARREARS FROM 1976 TO 1994.

II. XXX IN AFFIRMING THE ALLEGED ADVANCES OF SUPPORTBY RESPONDENTS UNCLENOEL DABAN.

III. XXX IN AFFIRMING THE AWARD OF SUPPORT EVEN IFPETITIONER IS NOT FINANCIALLY CAPABLE OF PROVIDINGTHE SAME TO RESPONDENTS.

IV. XXX WHEN IT ORDERED PETITIONER TO PROVIDE SUPPORTTO XXX RESPONDENTS EVEN IF PETITIONERS OBLIGATIONTO PROVIDE SUPPORT HAD ALREADY BEEN COMPLETELYSATISFIED BY THE PROCEEDS OF THE SALE OF HISEXCLUSIVE PROPERTY WHICH WERE ALL APPROPRIATED BYTHE RESPONDENTS.

The petition lacks merit.

Petitioner admits being obliged, as father, to provide support to both

respondents, Maowee and Maonaa. It is his threshold submission, however, that

he should not be made to pay support in arrears, i.e., from 1976 to 1994, no

previous extrajudicial, let alone judicial, demand having been made by the

respondents. He invokes the following provision of the Family Code to complete

his point:

Article 203The obligation to give support shall be demandablefrom the time the person who has a right to receive the same needs it formaintenance, but it shall not be paid except from the date of judicial orextrajudicial demand.

To petitioner, his obligation to pay under the aforequoted provision starts

from the filing of Civil Case No. 22185 in 1995, since only from that moment can

it be said that an effective demand for support was made upon him.


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Petitioners above posture has little to commend itself. For one, it

conveniently glossed over the fact that he veritably abandoned the respondent

sisters even before the elder of the two could celebrate her second birthday. To be

sure, petitioner could not plausibly expect any of the sisters during their tenderyears to go through the motion of demanding support from him, what with the fact

that even their mother (his wife) found it difficult during the period material to get

in touch with him. For another, the requisite demand for support appears to have

been made sometime in 1975. It may be that Lea made no extrajudicial demand in

the sense of a formal written demand in terms and in the imperious tenor

commonly used by legal advocates in a demand letter. Nonetheless, what would

pass as a demand was, however, definitely made. Asking one to comply with his

obligation to support owing to the urgency of the situation is no less a demand

because it came by way of a request or a plea. As it were, the trial court found

that a demand to sustain an award of support in arrears had been made in this case

and said so in its decision, thus:From 1976, [respondents] mother now and then went to their

[paternal] grandmothers house by their father and asked for support; this

notwithstanding their fathers commitment for this purpose which the

latter embodied in a note dated December 10, 1975. For twenty-oneyears that they needed support, [petitioner] complied with his obligationfor only two (2) years.

xxx xxx xxx

Last December 10, 1975, [petitioner] committed self for thesupport of his children, the [respondents] herein but failing,

plaintiffsmother asked extrajudicially for her childrens support since1976, when she went to her mothers house. .[8] (Words in bracket and

underscoring added.)

The appellate court made a parallel finding on the demand angle,

formulating the same in the following wise:
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We could not confer judicial approval upon [petitioners] postureof trying to evade his responsibility to give support to his daughterssimply because their mother did not make a formal demand therefor

from him. [Petitioners] insistence on requiring a formal demand from

his wife is truly pointless, in the face of his acknowledgment of andcommitment to comply with such obligation through a note in his ownhandwriting. Said note [stating that he will sustain his two daughters

Maowee and Maonaa] also stated as requested by their mother thuspractically confirming the fact of such demand having been made by[respondents] mother. The trial court thus correctly ruled that

[petitioners] obligation to pay support in arrears should commence from

1976.[9](Words in bracket added).

The Court finds no adequate reason to disturb the factual determination of

the CA confirmatory of that of the trial court respecting the demand Lea made onthe petitioner to secure support for the respondents. As a matter of long and sound

appellate practice, factual findings of the CA are accorded respect, if not finality,

save for the most compelling and cogent reasons.[10]Not one of the well-

recognized exceptions to this rule on conclusiveness of factual findings appear to

obtain in this case. Accordingly, the Court cannot grant the petitioners plea for a

review of the CAs findings bearing on the actuality that, as basis for an award of

support in arrears, an extrajudicial demand for support had been made on the

petitioner as evidenced by the December 10, 1975 note adverted to. Lest it be

overlooked, the jurisdiction of the Court in a petition for review, as here, is

generally limited to correction of errors of law. Complementing that postulate is

the rule that the Court is not bound to analyze and weigh all over again the

evidence already considered in the proceedings below,[11]except when, as earlier

indicated, compelling reasons demand a review of the factual conclusions drawn

from such evidence.

Petitioners second specification of error touches on the CAs affirmatory

holding that respondents uncle, Noel Daban, advanced the money for theirsupport. Again, petitioners lament on the matter is a veritable call for review of

factual determinations of the two courts below. It need not, accordingly, detain us

long. Suffice it to state in that regard that, of their close relatives, the respondents

appeared to have stayed longest with their uncle, Noel Daban. Noteworthy also is

the fact that petitioner, from 1976 to 1994, only gave Maowee and Maonaa token
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Petitioner closes his petition by urging the Court, as it did the CA earlier, to

consider a transaction that transpired after the trial court had rendered judgment.

We refer to the sale by Lea of half of what petitioner claims to be his exclusive or

capital property. As the petitioner would have this Court believe, Lea

Credit Cases 21 to 30

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Transcript of Credit Cases 21 to 30