SPOUSES AFULUGENCIA v. METROPOLITAN BANK & TRUST CO.

G.R. No. 185145 : February 5, 2014

FACTS: Petitioners, Sps. Vicente and Leticia Afulugencia, filed a Complaint for nullification of mortgage, foreclosure, auction sale, certificate of sale and other documents, with damages, against respondents Metropolitan Bank & Trust Co. (Metrobank, a domestic banking corporation) and Ortega (Clerk of Court and Ex-Officio Sheriff) before the RTC of Malolos City. After the filing of the parties’ pleadings and with the conclusion of pre-trial, petitioners filed a Motion for Issuance of Subpoena Duces Tecum Ad Testificandum to require Metrobank’s officers to appear and testify as the petitioners’ initial witnesses during the hearing for the (1) presentation of their evidence-in-chief, and  (2) to bring the documents relative to their loan with Metrobank, as well as those covering the extrajudicial foreclosure and sale of petitioners’ 200-square meter land in Meycauayan, Bulacan. Metrobank filed an Opposition arguing that for lack of a proper notice of hearing, the Motion must be denied; that being a litigated motion, the (1) failure of petitioners to set a date and time for the hearing renders the Motion ineffective and pro forma; (2) that pursuant to Sections 1 and 611 of Rule 25 of the Rules, Metrobank’s officers – who are considered adverse parties – may not be compelled to appear and testify in court for the petitioners since they were not initially served with written interrogatories; (3) that petitioners have not shown the materiality and relevance of the documents sought to be produced in court; and that petitioners were merely fishing for evidence. Petitioners submitted a Reply  stating that (1) the lack of a proper notice of hearing was cured by the filing of Metrobank’s Opposition; (2) that applying the principle of liberality, the defect may be ignored; (3) that leave of court is not necessary for the taking of Metrobank’s officers’ depositions; that for their case, (4) the issuance of a subpoena is not unreasonable and oppressive, but instead favorable to Metrobank, since it will present the testimony of these officers just the same during the presentation of its own evidence; (5) that the documents sought to be produced are relevant and will prove whether petitioners have paid their obligations to Metrobank in full, and will settle the issue relative to the validity or invalidity of the foreclosure proceedings; (6) and that the Rules do not prohibit a party from presenting the adverse party as its own witness.

ISSUE: Whether or not the Notice and Hearing apply to Motion for subpoena of respondent bank’s officers? Yes.

Held: YES. It is quite clear that Metrobank was notified of the Motion for Issuance of Subpoena Duces Tecum Ad Testificandum; in fact, it filed a timely Opposition thereto. The technical defect of lack of notice of hearing was thus cured by the filing of the Opposition. As officers of the adverse party Metrobank are being compelled to testify as the calling party’s main witnesses; likewise, they are tasked to bring with them documents which shall comprise the petitioners’ principal evidence. This is not without significant consequences that affect the interests of the adverse party, as will be shown below. As a rule, in civil cases, the procedure of calling the adverse party to the witness stand is not allowed, unless written interrogatories are first served upon the latter. This can be found in Section 6, Rule 25 of the Rules. One of the purposes of such rule is to prevent fishing expeditions and needless delays; it is there to maintain order and facilitate the conduct of trial. It will be presumed that a party who does not serve written interrogatories on the adverse party beforehand will most likely be unable to elicit facts useful to its case if it later opts to call the adverse party to the witness stand as its witness. On the procedural issue, it is quite clear that Metrobank was notified of the Motion for Issuance of Subpoena Duces Tecum Ad Testificandum; in fact, it filed a timely Opposition thereto. The technical defect of lack of notice of hearing was thus cured by the filing of the Opposition. As officers of the adverse party Metrobank are being compelled to testify as the calling party’s main witnesses; likewise, they are tasked to bring with them documents which shall comprise the petitioners’ principal evidence. This is not without significant consequences that affect the interests of the adverse party. It is true that under the Rules, a party may, for good cause shown and to prevent a failure of justice, be compelled to give testimony in court by the adverse party who has not served written interrogatories. But what petitioners seek goes against the very principles of justice and fair play. They would want that Metrobank provide the very evidence with which to prosecute and build their case from the start.

ZEPEDA v. CHINA BANKING CORPORATION

G.R. No. 172175 : October 9, 2006

FACTS: A Complaint for nullification of foreclosure proceedings and loan documents with damages[6] against respondent Chinabank was filed by Sps. Expedito and Alice Zepeda before the Regional Trial Court of San Jose, Camarines Sur. They alleged that they obtained a loan in the amount of P5,800,000.00 from respondent secured by a Real Estate Mortgage over a parcel of land. Petitioners subsequently encountered difficulties in paying their loan obligations hence they requested for restructuring which was allegedly granted by Chinabank. Hence, they were surprised when respondent bank extrajudicially foreclosed the subject property where it emerged as the highest bidder. Respondent bank was issued a Provisional Certificate of Sale and upon petitioners failure to redeem the property, ownership was consolidated in its favor. According to petitioners, the foreclosure proceedings should be annulled for failure to comply with the posting and publication requirements. They also claimed that they signed the Real Estate Mortgage and Promissory Note in blank and were not given a copy and the interest rates thereon were unilaterally fixed by the respondent. Respondent banks motion to dismiss was denied, hence it filed an answer with special affirmative defenses and counterclaim. It also filed a set of written interrogatories with 20 questions. In an Order dated April 1, 2004, the trial court denied Chinabanks affirmative defenses for lack of merit as well as its motion to expunge the complaint for being premature.The trial court reiterated its denial of Chinabanks affirmative defenses in its Order dated October 22, 2004 and directed the Clerk of Court to set the pre-trial conference for the marking of the parties documentary evidence. Aggrieved, respondent bank filed a petition for certiorari under Rule 65 which was granted by the Court of Appeals. It held that the trial court gravely abused its discretion in issuing the two assailed Orders. It ruled that compelling reasons warrant the dismissal of petitioners complaint because they acted in bad faith when they ignored the hearings set by the trial court to determine the veracity of Chinabanks affirmative defenses; they failed to answer Chinabanks written interrogatories; and the complaint states no cause of action. Petitioners motion for reconsideration was denied.

ISSUE: Whether or not the complaint should be dismissed for failure of petitioners to answer respondent’s written interrogatories as provided for in Section 3(c), Rule 29 of the Rules of Court.

HELD: NO. The consequences enumerated in Section 3(c) of Rule 29 would only apply where the party upon whom the written interrogatories is served, refuses to answer a particular question in the set of written interrogatories and despite an order compelling him to answer the particular question, still refuses to obey the order. Under the case of Arellano v. Court of First Instance of Sorsogon, the consequences enumerated in Section 3(c) of Rule 29 would only apply where the party upon whom the written interrogatories is served, refuses to answer a particular question in the set of written interrogatories and despite an order compelling him to answer the particular question, still refuses to obey the order. In this case, petitioners refused to answer the whole set of written interrogatories, not just a particular question. Clearly then, respondent bank should have filed a motion based on Section 5 and not Section 3(c) of Rule 29. Due to respondent bank’s filing of an erroneous motion, the trial court cannot be faulted for ruling that the motion to expunge was premature for lack of a prior application to compel compliance based on Section 3.

OGAYON v. PEOPLE OF THE PHILIPPINES

G.R. No. 188794 : September 2, 2015

FACTS: Two criminal cases were filed against Ogayon for violation of Sections 11 (Possession of Dangerous Drugs) and 12 (Possession of Equipment, Instrument, Apparatus and Other Paraphernalia for Dangerous Drugs) of RA 9165. The RTC rendered a joint judgment convicting Ogayon of the two criminal charges against him. Relying on the presumption of regularity, the RTC rejected Ogayon’s frame-up defense. Ogayon appealed to the CA. He questioned the validity of the search warrant, claiming it was improperly issued. He argued that the search warrant was defective for lack of transcript showing that the issuing judge conducted an examination of the applicant for search warrant and his witnesses. However, the CA upheld the search warrant’s validity due to Ogayon’s failure to make a timely objection against the warrant during the trial. The CA affirmed Ogayon’s conviction for possession of drugs and drug paraphernalia, and concluded that Ogayon is deemed to have waived the right to question the legality of the search warrant.

ISSUE: Whether or not a search warrant was invalid for being highly irregular, thereby rendering the seized articles as inadmissible as evidence?

HELD: YES. The purpose of the Rules in requiring depositions to be taken is to satisfy the examining magistrate as to the existence of probable cause. The Bill of Rights does not make it an imperative necessity that depositions be attached to the records of an application for a search warrant. Hence, said omission is not necessarily fatal, for as long as there is evidence on the record showing what testimony was presented. IN THIS CASE, apart from the statement in the search warrant itself, we find nothing in the records of this case indicating that the issuing judge personally and thoroughly examined the applicant and his witnesses. The absence of depositions and transcripts of the examination was already admitted; the application for the search warrant and the affidavits, although acknowledged by Ogayon himself, could not be found in the records. Unlike in Tee, where the testimony given during trial revealed that an extensive examination of the applicant’s witness was made by the judge issuing the warrant, the testimonies given during Ogayon’s trial made no reference to the application for the search warrant. SPO4 Caritos testified that he was among those who conducted the surveillance before the application for a search warrant was made. However, he was not the one who applied for the warrant; in fact, he testified that he did not know who applied for it.

MARTINEZ v. ONGSIAKO

G.R. No. 209057 : March 15, 2017

FACTS: A Petition seeking permission to perpetuate his testimony under Rule 24 of the Rules of Civil Procedure was filed by respondent before the RTC of Makati. He alleged that the taking of his deposition was necessary because of some personal circumstances. In his petition, he also named the expected adverse parties in the actions he anticipated would be filed. Petitioner thereafter filed a Comment/Opposition to the Petition on the ground that the filing of a separate action for the perpetuation of testimony was tantamount to forum shopping. The RTC granted the respondent’s Petition and ordered his deposition to be taken. Petitioner, along with other adverse parties, sought a reconsideration of the RTC Resolution, but the RTC denied the motions in open court. A hearing and cross-examination by adverse parties was then set. The hearing proceeded notwithstanding the absence of the petitioner and his counsel, and the direct examination of respondent was concluded. The RTC conducted confidence-building activities for respondent and his brother, Juan Miguel Ongsiako. The parties, however, failed to reach an agreement. The scheduled hearing was impeded by the withdrawal of appearance by the law firm representing Juan Miguel. The trial court reset the hearing and was announced to all parties present in the open court. For those who were absent during the hearing, such as the petitioner and his counsel, the RTC directed that copies of the written order be server upon them. RTC then received a copy of the Petition for Certiorari filed by petitioner with the CA. the Petition questioned its resolution. The cross examination of respondent finally proceeded, but both petitioner and his counsel were again absent at the hearing. The RTC noted, however, that petitioner had filed a Motion to Suspend Proceedings right before the start of the hearing. In his motion, he requested that the proceedings for the perpetuation of testimony be suspended pending the final resolution of the Petition for Certiorari earlier filed with the CA. Towards the end of the proceedings on August 18, 2010, the RTC issued an Order declaring that petitioner, together with Juan Miguel, had waived their right to cross-examine respondent.

ISSUE: Whether or not the CA correctly affirmed the RTC ruling that declared petitioner to have waived his right to cross-examination? No.

HELD: NO. The right to cross-examine opposing witnesses has long been considered a fundamental element of due process in both civil and criminal proceedings. In proceedings for the perpetuation of testimony, the right to cross­ examine a deponent is an even more vital part of the procedure. In fact, the Revised Rules on Evidence provide that depositions previously taken are only admissible in evidence against an adverse party who had the opportunity to cross-examine the witness.Because depositions are an exception to the general rule on the inadmissibility of hearsay testimony, the process of cross-examination is an important safeguard against false statements. IN THIS CASE, the conduct of petitioner cannot be construed as a waiver of his right to cross-examine respondent. the records of the case reveal that neither he nor his counsel was adequately informed of the new schedule for the cross-examination of respondent. While the RTC ordered that Notices of Hearing be sent to both petitioner and his counsel, they did not receive these processes in time for the hearing through no fault of their own. the absence of petitioner and his counsel at the hearing was clearly not due to their own fault. Hence, it would be unfair and unjust to consider the failure of petitioner to attend the hearing as signifying his intention to waive the right to cross-examine respondent.

GEORG v. HOLY TRINITY COLLEGE

G.R. No. 190408 : July 20, 2016

FACTS: A Memorandum of Agreement was executed between petitioner as first party-assignee; the Group as second-party assignor and S.C. Roque Group of Companies Holding Limited Corporation and S.C. Roque Foundation Incorporated as foundation-grantor. In an Amended Complaint for a Sum of Money with Damages filed before the RTC, petitioner claimed that the second-party assignor/respondent and the foundation-grantor have not paid and refused to pay their obligation under the MOA. During the pre-trial, there were facts that was stipulated. The RTC reconsidered its order issued a Writ of Attachment against respondent. In their Answer with Counterclaim, respondent argued that the MOA on which petitioner based its cause of action does not state that respondent is a party. Neither was respondent obligated to pay the amount of P4,624,705.00 for the European Tour of the Group nor did it consent to complying with the terms of the MOA. Respondent asserted that the thumbmark of Sr. Medalle was secured without her consent. Respondent maintained that since it was not a party to the MOA, it is not bound by the provisions stated therein. The RTC ruled in favor of petitioner. Respondent filed a notice of appeal. The CA relieved respondent of any liability for petitioner’s monetary claims. Aggrieved, petitioner elevated the case to this Court via a petition for review.

ISSUE: Whether or not the deposition conducted upon Sister Medalle is admissible? No.

HELD: NO. Petitioner claims that Sr. Medalle knew fully well the import of the MOA when she affixed her thumbmark therein while respondent alleges that fraud was employed to induce Sr. Medalle to affix her thumbmark. Between the two parties, credence is given to petitioner. First, the trial court did not give probative weight to the deposition of Sr. Medalle basically stating that respondent’s counsel failed to conform to Section 20, Rule 23 of the Rules of Court. Indeed, there is no record of any certification from Notary Public Romeo Juayno stating that the witness, Sr. Medalle in this case, was sworn to by him and that the deposition is a true record of the testimony given by Sr. Medalle. Furthermore, petitioner correctly noted that respondent’s counsel did not seek a leave of court to conduct a deposition in violation of Section 1, Rule 23 of the Rules of Court. In this case, respondent’s counsel filed a Notice of Deposition for the Taking of Deposition on 28 October 2002. The Answer with Counterclaim was only filed on 21 February 2005. In this instance, respondent should have asked for leave of court. Considering that the trial court has the discretion to decide whether a deposition may or may not be taken, it follows that it also has the discretion to disregard a deposition for noncompliance with the rules.

GO v. PEOPLE OF THE PHILIPPINES

G.R. No. 185527 : July 18, 2012

FACTS: Petitioners were charged before the Metropolitan Trial Court (MeTC) of Manila for Other Deceits under Article 318 of the Revised Penal Code (RPC).The prosecution’s complaining witness, Li Luen Ping, a frail old businessman from Laos, Cambodia, traveled from his home country back to the Philippines in order to attend the hearing held on September 9, 2004. However, trial dates were subsequently postponed due to his unavailability. The private prosecutor filed with the MeTC a Motion to Take Oral Deposition of Li Luen Ping, alleging that he was being treated for lung infection at the Cambodia Charity Hospital in Laos, Cambodia and that, upon doctor’s advice, he could not make the long travel to the Philippines by reason of ill health. Notwithstanding petitioners’ Opposition, the MeTC granted the motion after the prosecution complied with the directive to submit a Medical Certificate of Li Luen Ping. Petitioners sought its reconsideration which the MeTC denied, prompting petitioners to file a Petition for Certiorari  before the RTC. Upon denial by the RTC of their motion for reconsideration through an Order dated March 5, 2006, the prosecution elevated the case to the CA. the CA denied petitioners’ motion for Reconsideration.

ISSUE: Whether or not CA erred in sustaining that the rules on deposition-taking in civil cases is also applicable to criminal cases? Yes.

Held: YES. Rules on deposition-taking in civil cases is not applicable to criminal cases because the examination of witnesses in criminal cases must be done orally before a judge in open court in order to allow the accused to meet the witness against him face to face. The Procedure for Testimonial Examination of an Unavailable Prosecution Witness is covered under Section 15, Rule 119. The requirement is the “safest and most satisfactory method of investigating facts” as it enables the judge to test the witness’ credibility through his manner and deportment while testifying. It is not without exceptions, however, as the Rules of Court recognizes the conditional examination of witnesses and the use of their depositions as testimonial evidence in lieu of direct court testimony. But for purposes of taking the deposition in criminal cases, more particularly of a prosecution witness who would foreseeably be unavailable for trial, the testimonial examination should be made before the court, or at least before the judge, where the case is pending.

SANTAMARIA v. CLEARY

G.R. No. 197122 : June 15 2016

FACTS: Cleary, an American citizen with office address in California, filed a Complaint for specific performance and damages against Miranila Land Development Corporation (petitioner is included) before RTC of Cebu. he Complaint involved shares of stock of Miranila Land Development Corporation, for which Cleary paid 191K USD. He expressed his intent in availing himself “of the modes of discovery under the rules.” Cleary moved for court authorization to take deposition. He prayed that his deposition be taken before the Consulate-General of the Philippines in Los Angeles and be used as his direct testimony Santamaria and Boza opposed, stating that he deprived the court and the parties the opportunity to observe his demeanor and directly propound questions on him. The trial court denied Cleary’s Motion for Court Authorization to Take Deposition in the Order, for depositions are not meant to be a substitute for actual testimony in open court. Cleary elevated the case to the Court of Appeals. Court of Appeals granted Cleary’s Petition for Certiorari and reversed the trial court’s ruling.

ISSUE: Whether or not the Motion for Court Authorization to Take Deposition should be granted? Yes.

HELD: YES. Jurisprudence has discussed how “under the concept adopted by the new Rules, the deposition serves the double function of a method of discovery — with use on trial not necessarily contemplated — and a method of presenting testimony.” The taking of depositions has been allowed as a departure from open-court testimony. Petitioners argue that the deposition sought by respondent is not for discovery purposes as he is the plaintiff himself. To support their contention, they cite Northwest v. Cruz, where it was ruled that the examination of witnesses in open court — should be observed since the deposition was only to accommodate the petitioner’s employee who was in the United States, and not for discovery purposes. In keeping with the principle of promoting the just, speedy and inexpensive disposition of every action and proceeding, depositions are allowed as a “departure from the accepted and usual judicial proceedings of examining witnesses in open court where their demeanor could be observed by the trial judge.” Depositions are allowed, provided they are taken in accordance with the provisions of the Rules of Court, that is, with leave of court if the summons have been served, without leave of court if an answer has been submitted; and provided, further, that a circumstance for their admissibility exists.

REPUBLIC v. SANDIGANBAYAN (2011)

G.R. No. 152375 : December 16 2011

FACTS: A Complaint for reconveyance, reversion, accounting, restitution, and damages was filed against the respondents before the Sandiganbayan. It was alleged that that respondents illegally manipulated the purchase of the major shareholdings of Cable and Wireless Limited in Eastern Telecommunications Philippines, Inc. (ETPI). In the proceedings for Civil Case 0130, the testimony of Mr. Bane was taken by way of deposition upon oral examination before the consul general of the Philippine Embassy in London. The purpose was for Bane to identify and testify on the facts set forth in his affidavit in order to prove the ownership issue in favor of the petitioner and/or establish the prima facie factual foundation for sequestration of ETPI’s Class A stock. As to Civil Case 009, the petitioner filed a motion to adopt the testimonies of the witnesses in Civil Case 0130, including the deposition of Mr. Bane which was denied by the Sandiganbayan because he was not available for cross-examination. The petitioners did not question the said denial, and instead made its Formal Offer of Evidence. The Bane deposition was not included as part of the exhibit. Thus, they filed a second motion with prayer for re-opening of the case for the purpose of introducing additional evidence and requested the court to take judicial notice of the facts established by the Bane deposition. This was denied by the Sandiganbayan.

ISSUE: Whether or not Bane’s deposition is admissible under the Rules of Court? Yes.

HELD: YES.  Before a party can make use of the deposition taken at the trial of a pending action, Section 4, Rule 23 of the Rules of Court does not only require due observance of its sub-paragraphs (a) to (d); it also requires, as a condition for admissibility, compliance with “the rules on evidence.” Thus, even Section 4, Rule 23 of the Rules of Court makes an implied reference to Section 47, Rule 130 of the Rules of Court before the deposition may be used in evidence. In this case, the deponent Maurice V. Bane was the Executive Vice-President and Treasurer of ETPI from 1974 until his retirement in 1987. Maurice V. Bane had personal knowledge of and involvement in the circumstances leading to the formation of ETPI in 1974, which is crucial to petitioner’s allegation that private respondents’ interest in ETPI rightfully belongs to the Government. To dismiss the Bane deposition as inadmissible based on the tenuous ground that there was no “actual consolidation” of cases is to disregard the obvious fact that the Bane deposition was taken in CIVIL CASE NO. 0009 (Incident Case No. 0130 and G.R. No. 107789) and that all the defendants (now private respondents) in Civil Case No. 0009 were duly notified of the scheduled deposition-taking.

MARCELO v. SANDIGANBAYAN

G.R. No. 156605 : August 28 2007

FACTS: A Complaint for recovery of ill-gotten wealth was filed by the Republic (through the PCGG) against Marcelo, Fabian Ver, and Ferdinand and Imelda Marcos. The Republic alleged that the parties acquired the ill-gotten wealth through unlawful means. After several amendements, the Republic was able to implead sixteen corporations (16) corporations who were used by the defendants as dummies. Thereafter, the corporations filed their respective Answers, which contained these common allegations: they are not owned, controlled or were acquired by Marcello who is merely an officer/stockholder; and that their assets were acquired legally. Following the filing by the Republic of its Pre-Trial Brief, Marcelo and MFC submitted his own Pre-Trial Brief With Written Interrogatories and Request for Admission. Then, the petitioners filed three (3) separate Motion for Summary Judgment. The petitioners contend that they are entitled to a summary judgment on the ground that the Republic failed to answer the petitioner’s written interrogatories and request for written admission. In result the the matters set forth in their written interrogatories are deemed established. The Sandiganbayan denied the Motions for Summary Judgement. Hence, this petition.

ISSUE: Whether or not the failure of the Republic to answer the petitioner’s written interrogatories and request for written admissions is a ground for the dismissal of action? Yes.

HELD: YES.The Republic cannot plausibly evade the consequences of its failure to answer written interrogatories and requests for admission. If the plaintiff fails or refuses to answer the interrogatories, it may be a good basis for the dismissal of his complaint for non-suit unless he can justify such failure or refusal. To be sure, the Rules of Court prescribes the procedures and defines all the consequence/s for refusing to comply with the different modes of discovery. The case of Republic v. Sandiganbayan, 204 SCRA 213 (1991), a case for recovery of ill-gotten wealth where the defendants served upon the PCGG written interrogatories but the latter refused to make a discovery, is relevant.

PHILEX MINING CORPORATION vs. CIR (1998)

G.R. No. 125704 : August 28 1998

FACTS:

  1. On 1989 to 1991, Philex paid VAT input taxes amounting to P119,977,037.02. It then filed a claim for VAT input credit/refund to BIR.
  2. While waiting for the approval of the tax refund/credit, Philex received a letter from BIR  asking it to settle its tax liabilities in the total amount of P123,821.982.52.
  3. Philex protested the demand stating that the pending claims for tax credit/refund should be applied against the tax liabilities as the Court previously allowed in the case of CIR v. Itogon-Suyoc Mines Inc. However, BIR said in its reply that legal compensation cannot take place and thus Philex must pay the amount demanded.
  4. Aggrieved, Philex raised the issue to the Court of Tax Appeals.
    • In the course of the proceedings, the BIR issued Tax Credit Certificate SN 001795 in the amount of P13,144,313.88 which, applied to the total tax liabilities of Philex of P123,821,982.52; effectively lowered the latter’s tax obligation to P110,677,688.52.
  5. Despite the reduction of its tax liabilities, CTA still ordered Philex to pay the remaining balance of P110,677,688.52 plus interest on, March 16, 1995. It ruled that:
    • Off-set cannot take place since the obligations is not due and demandable, as well as not fully liquidated.
    • “taxes cannot be subject to set-off on compensation since claim for taxes is not a debt or contract.”
  6. Aggrived, Philex appealed the matter to the Court of Appeals, which affirmed the CTA decision. CA also denied Philex’s motion for reconsideration.
  7. A few days after the denial of its motion for reconsideration, Philex was able to obtain its VAT input credit/refund not only for the taxable year 1989 to 1991 but also for 1992 and 1994.
    • Philex now contends that the same should, ipso jure, off-set its excise tax liabilities since both had already become “due and demandable, as well as fully liquidated;” hence, legal compensation can properly take place.
    • It also asserts that the BIR violated Section 106 (e) 30 of the National Internal Revenue Code of 1977, which requires the refund of input taxes within 60 days, when it took five years for the latter to grant its tax claim for VAT input credit/refund.

ISSUE/S:

  1. W/N CA erred in ruling that legal compensation can properly take place between the VAT input credit/refund and the excise tax liabilities of Philex Mining Corp?
  2. W/N BIR has violated the NIRC which requires the refund of input taxes within 60 days?
  3. W/N violation by BIR is sufficient to justify non-payment by Philex of its tax liabilities?

HELD:

  1. NO. CA did not err in ruling that legal compensation can properly take place between the VAT input credit/refund and the excise tax liabilities of Philex Mining Corp.

Philex’s claim for this is an outright disregard of the basic principle in tax law that taxes are the lifeblood of the government and so should be collected without unnecessary hindrance.

we cannot allow Philex to refuse the payment of its tax liabilities on the ground that it has a pending tax claim for refund or credit against the government which has not yet been granted. It must be noted that a distinguishing feature of a tax is that it is compulsory rather than a matter of bargain.

Hence, a tax does not depend upon the consent of the taxpayer. 26 If any taxpayer can defer the payment of taxes by raising the defense that it still has a pending claim for refund or credit, this would adversely affect the government revenue system. A taxpayer cannot refuse to pay his taxes when they fall due simply because he has a claim against the government or that the collection of the tax is contingent on the result of the lawsuit it filed against the government. 27 Moreover, Philex’s theory that would automatically apply its VAT input credit/refund against its tax liabilities can easily give rise to confusion and abuse, depriving the government of authority over the manner by which taxpayers credit and offset their tax liabilities.

CIR v. Itogon-Suyoc Mines Inc. is no longer without any support in statutory law. The premise of our ruling in the aforementioned case was anchored on Section 51 (d) of the National Revenue Code of 1939. However, when the National Internal Revenue Code of 1977 was enacted, the same provision upon which the Itogon-Suyoc pronouncement was based was omitted. Accordingly, the doctrine enunciated in Itogon-Suyoc cannot be invoked by Philex.

2. YES. BIR has violated the NIRC which requires the refund of input taxes within 60 days.

VAT input taxes were paid between 1989 to 1991 but the refund of these erroneously paid taxes was only granted in 1996. Obviously, had the BIR been more diligent and judicious with their duty, it could have granted the refund earlier. We need not remind the BIR that simple justice requires the speedy refund of wrongly-held taxes.

3. NO. The violation by BIR is not sufficient to justify non-payment by Philex of its tax liabilities.

Despite our concern with the lethargic manner by which the BIR handled Philex’s tax claim, it is a settled rule that in the performance of governmental function, the State is not bound by the neglect of its agents and officers. Nowhere is this more true than in the field of taxation. 37 Again, while we understand Philex’s predicament, it must be stressed that the same is not a valid reason for the non-payment of its tax liabilities.

While we can never condone the BIR’s apparent callousness in performing its duties, still, the same cannot justify Philex’s non-payment of its tax liabilities. The adage “no one should take the law into his own hands” should have guided Philex’s action.