COMMISSIONER OF IR VS CENTRAL LUZON DRUG CORP

GR 148512 June 26, 2006

Azcuna, J.:

FACTS:

This is a petition for review under Rule 45 of Rules of Court seeking the nullification of CA decision granting respondent’s claim for tax equal to the amount of the 20% that it extended to senior citizens on the latter’s purchases pursuant to Senior Citizens Act. Respondent deducted the total amount of Php219,778 from its gross income for the taxable year 1995 whereby respondent did not pay tax for that year reporting a net loss of Php20,963 in its corporate income tax. In 1996, claiming that the Php219,778 should be applied as a tax credit, respondent claimed for refund in the amount of Php150, 193.

ISSUE:

Whether or not the 20% discount granted by the respondent to qualified senior citizens may be claimed as tax credit or as deduction from gross sales?

RULING:

“Tax credit” is explicitly provided for in Sec4 of RA 7432. The discount given to Senior citizens is a tax credit, not a deduction from the gross sales of the establishment concerned. The tax credit that is contemplated under this Act is a form of just compensation, not a remedy for taxes that were erroneously or illegally assessed and collected. In the same vein, prior payment of any tax liability is a pre-condition before a taxable entity can benefit from tax credit. The credit may be availed of upon payment, if any. Where there is no tax liability or where a private establishment reports a net loss for the period, the tax credit can be availed of and carried over to the next taxable year.

JOSE DE BORJA, petitioner-appellee, vs.VICENTE G. GELLA, ET AL., respondents-appellants.

Jose de Borja has been delinquent in the payment of his real estate taxes since 1958 for properties located in the City of Manila and Pasay City and has offered to pay them with two negotiable, certificates of indebtedness Nos. 3064 and 3065 in the amounts of P793.40 and P717.69, respectively. Borja was, however, a mere assignee of the aforesaid negotiable certificates, the applicants for backpay rights covered by them being respectively Rafael Vizcaya and Pablo Batario Luna.

The offers to pay the estate taxes in question were rejected by the city treasurers of both Manila and Pasay cities on the ground of their limited negotiability under Section 2, Republic Act No. 304, as amended by Republic Act 800, and in the case of the city treasurer of Manila on the further ground that he was ordered not to accept them by the city mayor, for which reason Borja was prompted to bring the question to the Treasurer of the Philippines who opined, among others, that the negotiable certificates cannot be accepted as payment of real estate taxes inasmuch as the law provides for their acceptance from their backpay holder only or the original applicant himself, but not his assignee. In his letter of April 29, 1960 to the Treasurer of the Philippines, however, Borja entertained hope that the certificates would be accepted for payment in view of the fact that they are already long past due and redeemable, but his hope was frustrated. So on June 30, 1960, Borja filed an action against the treasurers of both the City of Manila and Pasay City, as well as the Treasurer of the Philippines, to impel them to execute an act which the law allegedly requires them to perform, to wit: to accept the above-mentioned certificates of indebtedness considering that they were already due and redeemable so as not to deprive him illegally of his privilege to pay his obligation to the government thru such means.

Respondents in due time filed their answer setting up the reasons for their refusal to accept the certificates, and after the requisite trial was held, the court a quo rendered judgment the dispositive part of which reads:

WHEREFORE, the treasurers of the City of Manila and Pasay City, their agents and other persons acting in their behalf are hereby enjoined from including petitioner's properties in the payment of real estate, taxes, and to sell them at public auction and respondent Treasurer of the Philippines, and the treasurers of the City of Manila and Pasay City are hereby ordered to accept petitioner's Negotiable Certificates of Indebtedness Nos. 3064 and 3065 in the sums of P793.40 and P717.39 in payment of real estate taxes of his properties in the City of Manila and Pasay City, respectively, without costs.

Respondents took this appeal on purely questions of law.1äwphï1.ñët

Reduced to bare essentials, the 12 errors assigned by appellants may be boiled down to the following: (a) has appellee the right to apply to the payment of his real estate taxes to the government of Manila and Pasay cities the certificates of indebtedness he holds while appellants have the correlative legal duty to accept the certificates in payment of said taxes?; (b) can compensation be invoked to extinguish appellee's real estate tax liability between the latter's obligation and the credit represented by said certificates of indebtedness?

Anent the first issue, the pertinent legal provision to be reckoned with is Section 2 of Republic Act No. 304, as amended by Republic Act No. 800, which in part reads:

SEC. 2. The Treasurer of the Philippines shall, upon application, and within one year from the approval of this Act, and under such rules and regulations as may be promulgated by the Secretary of Finance, acknowledge and file requests for the recognition of the right to the salaries and wages as provided in section one hereof, and notice of such acknowledgment shall be issued to the applicant which shall state the total

amount of such salaries or wages due to the applicant, and certify that it shall be redeemed by the Government of the Philippines within ten years from the date of their issuance without interest: Provided, that upon application . . . a certificate of indebtedness may be issued by the Treasurer of the Philippines covering the whole or part of the total salaries or wages the right to which has been duly acknowledged and recognized, provided that the face value of such certificate of indebtedness shall not exceed the amount that the applicant may need for the payment of (1) obligations subsisting at the time of the approval of this Act for which the applicant may directly be liable to the Government or to any of its branches or instrumentalities, or the corporations owned or controlled by the Government, or to any citizen of the Philippines, who may be willing to accept the same for such settlement; (2) his taxes; . . . and Provided, also, That any person who is not an alien, bank or other financial institution at least sixty per centum of whose capital is owned by Filipinos may, notwithstanding any provision of its charter, articles of incorporation, by-laws, or rules and regulations to the contrary, accept or discount at not more than three and one-half per centum per annum for ten years a negotiable certificate of indebtedness which shall be issued by the Treasurer of the Philippines upon application by a holder of a back pay acknowledgment. . . . .

To begin with, it cannot be contended that appellants are in duty bound to accept the negotiable certificates of indebtedness held by appellee in payment of his real estate taxes for the simple reason that they were not obligations subsisting at the time of the approval of Republic Act No. 304 which took effect on June 18, 1948. It should be noted that the real estate taxes in question have reference to those due in 1958 and subsequent years. The law is explicit that in order that a certificate may be used in payment of an obligation the same must be subsisting at the time of its approval even if we hold that a tax partakes of this character, neither can it be contended that appellee can compel the government to accept the alleged certificates of indebtedness in payment of his real estate taxes under proviso No. 2 abovequoted also for the reason that in order that such payment may be allowed the tax must be owed by the applicant himself . This is the correct implication that may be drawn from the use by the law of the words "his taxes". Verily, the right to use the backpay certificate in settlement of taxes is given only to the applicant and not to any holder of any negotiable certificate to whom the law only gives the right to have it discounted by a Filipino citizen or corporation under certain limitations. Here appellee is not himself the applicant of the certificate, in question. He is merely an assignee thereof, or a subsequent holder whose right is at most to have it discounted upon maturity — or to negotiate it in the meantime. A fortiori, it may be included that, not having the right to use said certificates to pay his taxes, appellee cannot compel appellants to accept them as he requests in the present petition for mandamus. As a consequence, we cannot but hold that mandamus does not lie against appellants because they have in no way neglected to perform an act enjoined upon them by law as a duty, nor have they unlawfully excluded appellee from the use or enjoyment of a right to which be is entitled.1

We are aware of the cases2 cited by the court a quo wherein the government banking institutions were ordered to accept the backpay certificates of petitioners in payment of their indebtedness to them, but they are not here in point because in the cases mentioned the petitioners were applicants and original holders of the corresponding backpay certificates. Here appellee is not.

With regard to the second issue, i.e., whether compensation can be invoked insofar as the two obligations are concerned, Articles 1278 and 1279 of the new Civil Code provide:

ART. 1278. Compensation shall take place when two persons, in their own right, are creditors and debtors of each other.

ART. 1279. In order that compensation may be proper, it is necessary:

(1) That each one of the obligors be bound principally, and that he be at the same time a principal creditor of the other;

(2) That both debts consist in a sum of money, or if the things due are consumable, they be of the same kind, and also of the same quality if the latter has been stated;

(3) That the two debts be due;

(4) That they two liquidated and demandable;

(5) That over neither of them there be any retention or controversy, commenced by third persons and communicated in due time to the debtor.

It is clear from the above legal provisions that compensation cannot be effected with regard to the two obligations in question. In the first place, the debtor insofar as the certificates of indebtedness are concerned is the Republic of the Philippines, whereas the real estate taxes owed by appellee are due to the City of Manila and Pasay City, each one of which having a distinct and separate personality from our Republic. With regard to the certificates, the creditor is the appellee while the debtor is the Republic of the Philippines. And with regard to the taxes, the creditors are the City of Manila and Pasay City while the debtor is the appellee. It appears, therefore, that each one of the obligors concerning the two obligations is not at the same time the principal creditor of the other. It cannot also be said for certain that the certificates are already due. Although on their faces the certificates issued to appellee state that they are redeemable on June 18, 1958, yet the law does not say that they are redeemable from its approval on June 18, 1948 but "within ten years from the date of issuance" of the certificates. There is no certainty, therefore, when the certificates are really redeemable within the meaning of the law. Since the requisites for the accomplishment of legal compensation cannot be fulfilled, the latter cannot take place with regard to the two obligations as found by the court a quo.

WHEREFORE, the decision appealed from is reversed. The petition for mandamus is dismissed. The injunction issued against respondents-appellants is hereby lifted. No costs.

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PLANTERS PRODUCTS, INC., vs. FERTIPHIL CORPORATION. [G.R. No. 166006. March 14, 2008.]Facts: President Ferdinand Marcos, exercising his legislative powers, issued LOI No. 1465 which provided, among others, for the imposition by the Fertilizer Pesticide Authority (FPA) of a capital recovery component (CRC) on the domestic sale of all grades of fertilizers

in the Philippines. The goal is to make and keep respondent PPI viable. After the 1986 Edsa Revolution, FPA voluntarily stopped the imposition of the P10 levy. With the return of democracy, Fertiphil demanded from PPI a refund of the amounts it paid under LOI No. 1465, but PPI refused to accede to the demandFertiphil filed a complaint for collection and damages against FPA and PPI with the RTC in Makati. It questioned the constitutionality of LOI No. 1465 for being unjust, unreasonable, oppressive, invalid and an unlawful imposition that amounted to a denial of due process of law. FPA, through the Solicitor General, countered that the issuance of LOI No. 1465 was a valid exercise of the police power of the State in ensuring the stability of the fertilizer industry in the countryIssue/Held: Whether the levy is in exercise of police power or taxation power- TAXATIONRatio: We agree with the RTC that the imposition of the levy was an exercise by the State of its taxation power. While it is true that the power of taxation can be used as an implement of police power, the primary purpose of the levy is revenue generation. If the purpose is primarily revenue, or if revenue is, at least, one of the real and substantial purposes, then the exaction is properly called a tax. An inherent limitation on the power of taxation is public purpose. Taxes are exacted only for a public purpose. They cannot be used for purely private purposes or for the exclusive benefit of private persons. The purpose of a law is evident from its text or inferable from other secondary sources. Here, we agree with the RTC and that CA that the levy imposed under LOI No. 1465 was not for a public purpose because it expressly provided that the levy be imposed to benefit PPI, a private company. The purpose is explicit from Clause 3 of the law

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DIAZ VS. SECRETARY OF FINANCE- Value Added Tax (VAT)

May toll fees collected by tollway operators be subject to VAT?

YES. (1) VAT is imposed on “all kinds of services” and tollway operators who are engaged in constructing, maintaining, and operating expressways are no different from lessors of property, transportation contractors, etc.

(2) Not only do they fall under the broad term under (1) but also come under those described as “all other franchise grantees” which is not confined only to legislative franchise grantees since the law does not distinguish. They are also not a franchise grantee under Section 119 which would have made them subject to percentage tax and not VAT.

(3) Neither are the services part of the enumeration under Section 109 on VAT-exempt transactions.

(4) The toll fee is not a user’s tax and thus it is permissible to impose a VAT on the said fee. The MIAA case does not apply and the Court emphasized that toll fees are not taxes since they are not assessed by the BIR and do not go the general coffers of the government. Toll fees are collected by private operators as reimbursement for their costs and expenses with a view to a profit while taxes are imposed by the government as an attribute of its sovereignty. Even if the toll fees were treated as user’s tax, the VAT can not be deemed as a ‘tax on tax’ since the VAT is imposed on the tollway operator and the fact that it might pass-on the same to the tollway user, it will not make the latter directly liable for VAT since the shifted VAT simply becomes part of the cost to use the tollways.

(5) The assertion that the VAT imposed is not administratively feasible given the manner by which the BIR intends to implement the VAT (i.e., rounding off the toll rates and putting any excess collection in an escrow account) is not enough to invalidate the law. Non-observance of the canon of administrative feasibility will not render a tax imposition invalid “except to the extent that specific constitutional or statutory limitations are impaired”.

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Chamber of Real estate v. hon Romulo

FACTS:

Chamber of Real Estate and Builders' Associations, Inc. (CHAMBER) is questioning the constitutionality of Sec 27 (E) of RA 8424 and the revenue regulations (RRs) issued by the Bureau of Internal Revenue (BIR) to implement said provision and those involving creditable withholding taxes (CWT). [CWT issues will not be discussed]

CHAMBER assails the validity of the imposition of minimum corporate income tax (MCIT) on corporations and creditable withholding tax (CWT) on sales of real properties classified as ordinary assets. Chamber argues that the MCIT violates the due process clause because it levies income tax even if there is no realized gain.

MCIT scheme: (Section 27 (E). [MCIT] on Domestic Corporations.)A corporation, beginning on its fourth year of operation, is assessed an MCITof 2% of its gross income when such MCIT is greater than the normal

corporate income tax imposed under Section 27(A) (Applying the 30% taxrate to net income).

If the regular income tax is higher than the MCIT, the corporation does not pay the MCIT.

Any excess of the MCIT over the normal tax shall be carried forward and credited against the normal income tax for the three immediately succeeding taxable years.

The Secretary of Finance is hereby authorized to suspend the imposition of the [MCIT] on any corporation which suffers losses on account of prolonged labor dispute, or because of force majeure, or because of legitimate business reverses.

The term ‘gross income’ shall mean gross sales less sales returns, discounts and allowances and cost of goods sold. "Cost of goods sold" shall include all business expenses directly incurred to produce the  merchandise to bring them to their present location and use.

CHAMBER claims that the MCIT under Section 27(E) of RA 8424 is unconstitutional because it is highly oppressive, arbitrary and confiscatory which amounts to deprivation of property without due process of law. It explains that gross income as defined under said provision only considers the cost of goods sold and other direct expenses; other major expenditures, such as administrative and interest expenses which are equally necessary to produce gross income, were not taken into account. Thus, pegging the tax base of the MCIT to a corporation’s gross income is tantamount to a confiscation of capital because gross income, unlike net income, is not "realized gain."

ISSUE:

1. WON the imposition of the MCIT on domestic corporations is unconstitutional

2. WON RR 9-98 is a deprivation of property without due process of law because the MCIT is being imposed and collected even when there is actually a loss, or a zero or negative taxable income

HELD:

1. NO. MCIT is not violative of due process. The MCIT is not a tax on capital. The MCIT is imposed on gross income which is arrived at by deducting the capital spent by a corporation in the sale of its goods, i.e., the cost of goods and other direct expenses from gross sales. Clearly, the capital is not being taxed.

Furthermore, the MCIT is not an additional tax imposition. It is imposed in lieu of the normal net income tax, and only if the normal income tax is suspiciously low.

The MCIT merely approximates the amount of net income tax due from a corporation, pegging the rate at a very much reduced 2% and uses as the base the corporation’s gross income.

CHAMBER failed to support, by any factual or legal basis, its allegation that the MCIT is arbitrary and confiscatory. It does not cite any actual, specific and concrete negative experiences of its members nor does it present empirical data to show that the implementation of the MCIT resulted in the confiscation of their property.

Taxation is necessarily burdensome because, by its nature, it adversely affects property rights. The party alleging the law’s unconstitutionality has the burden to demonstrate the supposed violations in understandable terms.

2. NO. RR 9-98, in declaring that MCIT should be imposed whenever such corporation has zero or negative taxable income, merely defines the coverage of Section 27(E).

This means that even if a corporation incurs a net loss in its business operations or reports zero income after deducting its expenses, it is still subject to an MCIT of 2% of its gross income. This is consistent with the law which imposes the MCIT on gross income notwithstanding the amount of the net income.

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Juan Luna subd v sarmiento

Juan Luna Subdivision vs. SarmientoGR L-3538, 28 May 1952En Banc, Tuason (J): 7 concurFacts:

Juan Luna Subdivision is a local corporation which issued a check to the CityTreasurer of Manila foramount to be applied to its land tax for the second semester of 1941. The records of the City Treasurer do not show what was done with the check (It appears that it was deposited with the Philippine National Bank[PNB]). After liberation (WWII), the City Treasurer refused to refund the corporation’s deposit or apply it to such future taxes as might be found due, while the Philippine Trust Co (to which the check was presented) was unwilling to reverse its debit entry against Juan Luna Subd. Said amount is also subject of another disagreement between the corporation and the City Treasure, with the corporation claiming that the wholeamount of the check for the taxes for the last semester of 1941 have been remitted by CommonwealthAct 703 (1945).

Issue:Whether the provision allowing the remission covers taxes paid before the enactment of Commonwealth Act 703, or taxes which were still unpaid.

Held:The law is clear that it applies to “taxes and penalties due and payable,” i.e.taxes owed or owing. Theremission of taxes due and payable to the exclusion og taxes already collected does not constitute unfair discrimination. Each set of taxes is a class by itself, and the law would be open to attack as class legislation only if all taxpayers belonging to one class were not treated alike. Herein, they are not. The taxpayers who paid their taxes before liberation and those who had not were not on the same footing on the need of material relief. Taxpayers who had been in arrears in their obligation whould have to satisfy their liability with genuinecurrency, while the taxes paid during the occupation had been satisfied in Japanese War Notes, many of them at a time when those notes were well-nigh worthless. To refund those taxes with restored currency would be unduly enrich many of the payers at a greater expense to the people at large.

_________--BAsco v PAGCOR

On July 11, 1983, PAGCOR was created under PD 1869 to enable the Government to regulate and centralize all games of chance authorized by existing franchise or permitted by law. Basco and four others (all lawyers) assailed the validity of the law creating PAGCOR on constitutional grounds among others particularly citing that the PAGCOR’s charter is against the constitutional provision on local autonomy.

Basco et al contend that P.D. 1869 constitutes a waiver of the right of the City of Manila to impose taxes and legal fees; that Section 13 par. (2) of P.D. 1869 which exempts PAGCOR, as

the franchise holder from paying any “tax of any kind or form, income or otherwise, as well as fees, charges or levies of whatever nature, whether National or Local” is violative of the local autonomy principle.

ISSUE: Whether or not PAGCOR’s charter is violative of the principle of local autonomy.

HELD: NO. Section 5, Article 10 of the 1987 Constitution provides:

Each local government unit shall have the power to create its own source of revenue and to levy taxes, fees, and other charges subject to such guidelines and limitation as the congress may provide, consistent with the basic policy on local autonomy. Such taxes, fees and charges shall accrue exclusively to the local government.

A close reading of the above provision does not violate local autonomy (particularly on taxing powers) as it was clearly stated that the taxing power of LGUs are subject to such guidelines and limitation as Congress may provide.

Further, the City of Manila, being a mere Municipal corporation has no inherent right to impose taxes. The Charter of the City of Manila is subject to control by Congress. It should be stressed that “municipal corporations are mere creatures of Congress” which has the power to “create and abolish municipal corporations” due to its “general legislative powers”. Congress, therefore, has the power of control over Local governments. And if Congress can grant the City of Manila the power to tax certain matters, it can also provide for exemptions or even take back the power.

Further still, local governments have no power to tax instrumentalities of the National Government. PAGCOR is a government owned or controlled corporation with an original charter, PD 1869. All of its shares of stocks are owned by the National Government. Otherwise, its operation might be burdened, impeded or subjected to control by a mere Local government.

This doctrine emanates from the “supremacy” of the National Government over local governments

_________--Republic of the Philippines vs. Cocofed[GRs 147062-64, 14 December 2001]

Facts: Immediately after the 1986 EDSA Revolution, then President Corazon C. Aquino issued Executive Orders 1, 5 2 6 and 14. On the explicit premise that vast resources of the government have been amassed by former President Ferdinand E. Marcos, his immediate family, relatives, and close associates both here and abroad, the Presidential Commission on Good Government (PCGG) was created by Executive Order 1 to assist the President in the recovery of the ill-gotten wealth thus accumulated whether located in the Philippines or abroad. Executive Order 2 stated that the ill-gotten assets and properties are in the form of bank accounts, deposits, trust accounts, shares of stocks, buildings, shopping centers, condominiums, mansions, residences, estates, and other kinds of real and personal properties in the Philippines and in various countries of the

world. Executive Order 14, on the other hand, empowered the PCGG, with the assistance of the Office of the Solicitor General and other government agencies, inter alia, to file and prosecute all cases investigated by it under EOs 1 and 2. Pursuant to these laws, the PCGG issued and implemented numerous sequestrations, freeze orders and provisional takeovers of allegedly ill-gotten companies, assets and properties, real or personal. 

Among the properties sequestered by the Commission were shares of stock in the United Coconut Planters Bank (UCPB) registered in the names of the alleged “one million coconut farmers,” the so-called Coconut Industry Investment Fund companies (CIIF companies) and Eduardo Cojuangco Jr. In connection with the sequestration of the said UCPB shares, the PCGG, on 31 July 1987, instituted an action for reconveyance, reversion, accounting, restitution and damages (Case 0033) in the Sandiganbayan. On 15 November 1990, upon Motion of COCOFED, the Sandiganbayan issued a Resolution lifting the sequestration of the subject UCPB shares on the ground that COCOFED and the so-called CIIF companies had not been impleaded by the PCGG as parties-defendants in its 31 July 1987 Complaint for reconveyance, reversion, accounting, restitution and damages. The Sandiganbayan ruled that the Writ of Sequestration issued by the Commission was automatically lifted for PCGG’s failure to commence the corresponding judicial action within the six-month period ending on 2 August 1987 provided under Section 26, Article XVIII of the 1987 Constitution. The anti-graft court noted that though these entities were listed in an annex appended to the Complaint, they had not been named as parties-respondents. The Sandiganbayan Resolution was challenged by the PCGG in a Petition for Certiorari (GR 96073) in the Supreme Court. Meanwhile, upon motion of Cojuangco, the anti-graft court ordered the holding of elections for the Board of Directors of UCPB. However, the PCGG applied for and was granted by this Court a Restraining Order enjoining the holding of the election. Subsequently, the Court lifted the Restraining Order and ordered the UCPB to proceed with the election of its board of directors. Furthermore, it allowed the sequestered shares to be voted by their registered owners. The victory of the registered shareholders was fleeting because the Court, acting on the solicitor general’s Motion for Clarification/Manifestation, issued a Resolution on 16 February 1993, declaring that “the right of COCOFED, et. al. to vote stock in their names at the meetings of the UCPB cannot be conceded at this time. That right still has to be established by them before the Sandiganbayan. Until that is done, they cannot be deemed legitimate owners of UCPB stock and cannot be accorded the right to vote them.” On 23 January 1995, the Court rendered its final Decision in GR 96073, nullifying and setting aside the 15 November 1990 Resolution of the Sandiganbayan which lifted the sequestration of the subject UCPB shares. 

A month thereafter, the PCGG — pursuant to an Order of the Sandiganbayan — subdivided Case 0033 into eight Complaints (Cases 0033-A to 0033-H). Six years later, on 13 February 2001, the Board of Directors of UCPB received from the ACCRA Law Office a letter written on behalf of the COCOFED and the alleged nameless one million coconut farmers, demanding the holding of a stockholders’ meeting for the purpose of, among others, electing the board of directors. In response, the board approved a

Resolution calling for a stockholders’ meeting on 6 March 2001 at 3 p.m. On 23 February 2001, “COCOFED, et al. and Ballares, et al.” filed the “Class Action Omnibus Motion” in Sandiganbayan Civil Cases 0033-A, 0033-B and 0033-F, asking the Sandiganbayan to enjoin the PCGG from voting the UCPB shares of stock registered in the respective names of the more than one million coconut farmers; and to enjoin the PCGG from voting the SMC shares registered in the names of the 14 CIIF holding companies including those registered in the name of the PCGG. On 28 February 2001, the Sandiganbayan, after hearing the parties on oral argument, issued the Order, authorizing COCOFED, et. al. and Ballares, et. al. as well as Cojuangco, as are all other registered stockholders of the United Coconut Planters Bank, until further orders from the Court, to exercise their rights to vote their shares of stock and themselves to be voted upon in the United Coconut Planters Bank (UCPB) at the scheduled Stockholders’ Meeting on 6 March 2001 or on any subsequent continuation or resetting thereof, and to perform such acts as will normally follow in the exercise of these rights as registered stockholders. The Republic of the Philippines represented by the PCGG filed the petition for certiorari. 

Issue: Whether the PCGG can vote the sequestered UCPB shares. 

Held: The registered owner of the shares of a corporation exercises the right and the privilege of voting. This principle applies even to shares that are sequestered by the government, over which the PCGG as a mere conservator cannot, as a general rule, exercise acts of dominion. On the other hand, it is authorized to vote these sequestered shares registered in the names of private persons and acquired with allegedly ill-gotten wealth, if it is able to satisfy the two-tiered test devised by the Court in Cojuangco v. Calpo and PCGG v. Cojuangco Jr. Two clear “public character” exceptions under which the government is granted the authority to vote the shares exist (1) Where government shares are taken over by private persons or entities who/which registered them in their own names, and (2) Where the capitalization or shares that were acquired with public funds somehow landed in private hands. The exceptions are based on the common-sense principle that legal fiction must yield to truth; that public property registered in the names of non-owners is affected with trust relations; and that the prima facie beneficial owner should be given the privilege of enjoying the rights flowing from the prima facie fact of ownership. In short, when sequestered shares registered in the names of private individuals or entities are alleged to have been acquired with ill-gotten wealth, then the two-tiered test is applied. However, when the sequestered shares in the name of private individuals or entities are shown, prima facie, to have been (1) originally government shares, or (2) purchased with public funds or those affected with public interest, then the two-tiered test does not apply. Rather, the public character exceptions in Baseco v. PCGG and Cojuangco Jr. v. Roxas prevail; that is, the government shall vote the shares. Herein, the money used to purchase the sequestered UCPB shares came from the Coconut Consumer Stabilization Fund (CCSF), otherwise known as the coconut levy funds. The sequestered UCPB shares are confirmed to have been acquired with coco levies, not with alleged ill-gotten wealth. As the coconut levy funds are not only affected with public interest, but are in fact prima facie public funds, the Court believes that the government should be allowed to vote the questioned shares, because they

belong to it as the prima facie beneficial and true owner. The Sandiganbayan committed grave abuse of discretion in grossly contradicting and effectively reversing existing jurisprudence, and in depriving the government of its right to vote the sequestered UCPB shares which are prima facie public in character.____________--9. COCOFED vs. Republic, GR Nos. 177857-58, January 24, 2012

FACTS:

In 1971, Republic Act No. 6260 was enacted creating the Coconut Investment

Fund (CIF). The source of the CIF was a P0.55 levy on the sale of every 100 kg. of

copra. The Philippine Coconut Administration was tasked to collect and administer the

Fund. Out of the 0.55 levy, P0.02 was placed at the disposition of the COCOFED, the

recognized national association of coconut producers declared by the PCA. Cocofund

receipts were ought to be issued to every copra seller.

During the Martial Law regime, then President Ferdinand Marcos issued several

Presidential Decrees purportedly for the improvement of the coconut industry. The most

relevant among these is P.D. No. 755 which permitted the use of the Fund for the

“acquisition of a commercial bank for the benefit of coconut farmers and the

distribution of the shares of the stock of the bank it [PCA] acquired free to the

coconut farmers” (Sec.2).

Thus, the PCA acquired the First United Bank, later renamed the United Coconut

Planters Bank (UCPB). The PCA bought the 72.2% of PUB’s outstanding capital stock

or 137,866 shares at P200 per share (P27, 573,200.00) from Pedro Cojuangco in behalf

of the coconut farmers.” The rest of the Fund was deposited to the UCPB interest free.

Farmers who had paid the CIF and registered their receipts with PCA were given

their corresponding UCPB stock certificates. Only 16 million worth of COCOFUND

receipts were registered and a large number of the coconut farmers opted to sell all/part

of their UCPB shares to private individuals.

Simply put, parts of the coconut levy funds went directly or indirectly to various

projects and/or was converted into different assets or investments through the years.

After the EDSA Revolution, President Corazon Aquino issued Executive Order 1

which created the Presidential Commission on Good Government (PCGG).

The PCGG aimed to assist the President in the recovery of ill-gotten wealth

accumulated by the Marcoses and their cronies. PCGG was empowered to file cases

for sequestration in the Sandiganbayan.

Among the sequestered properties were the shares of stock in the UCPB

registered in the name of “over a million coconut farmers” held in trust by the PCA. The

Sandiganbayan allowed the sequestration by ruling in a Partial Summary Judgment that

the Coconut Levy Funds are prima facie public funds and that Section 1 and 2 of PD

No. 755 (and some other PDs) were unconstitutional.

The COCOFED representing the “over a million coconut farmers” via Petition for

review under Rule 45 sought the reversal of the ruling contending among others that the

sequestration amounted to “taking of private property without just compensation and

impairment of vested right of ownership.”

ISSUE: What is the NATURE of the Coconut Levy Fund?

RULING:

The SC ruled in favor of the REPUBLIC.

To begin with, the Coconut Levy was imposed in the exercise of the State’s

inherent power of taxation. Indeed, the Coconut Levy Funds partake the nature of

TAXES. The Funds were generated by virtue of statutory enactments by the proper

legislative authorities and for public purpose.

The Funds were collected to advance the government avowed policy of protecting the coconut industry. The SC took judicial notice of the fact that the

coconut industry is one of the great economic pillars of our nation, and coconuts and

their byproducts occupy a leading position among the countries’ export products.

Taxation is done not merely to raise revenues to support the government, but also to

provide means for the rehabilitation and the stabilization of a threatened industry,

which is so affected with public interest.

_________________-OSMEÑAvs.ORBOSGR No. 99886, March 31, 1993

" To avoid the taint of unlawful delegation of the power to tax, there must be a standard which implies that the legislature determines matter of principle and lays down fundamental policy."

FACTS: Senator John Osmeña assails the constitutionality of paragraph 1c of PD 1956, as amended by EO 137, empowering the Energy Regulatory Board (ERB) to approve the increase of fuel prices or impose additional amounts on petroleum products which proceeds shall accrue to the Oil Price Stabilization Fund (OPSF) established for the reimbursement to ailing oil companies in the event of sudden price increases. The petitioner avers that the collection on oil products establishments is an undue and invalid delegation of legislative power to tax. Further, the petitioner points out that since a 'special fund' consists of monies collected through the taxing power of a State, such amounts belong to the State, although the use thereof is limited to the special purpose/objective for which it was created. It thus appears that the challenge posed by the petitioner is premised primarily on the view that the powers granted to the ERB under P.D. 1956, as amended, partake of the nature of the taxation power of the State.

ISSUE: Is there an undue delegation of the legislative power of taxation?

HELD: None. It seems clear that while the funds collected may be referred to as taxes, they are exacted in the exercise of the police power of the State. Moreover, that the OPSF as a special fund is plain from the special treatment given it by E.O. 137. It is segregated from the general fund; and while it is placed in what the law refers to as a "trust liability account," the fund nonetheless remains subject to the scrutiny and review of the COA. The Court is satisfied that these measures comply with the constitutional description of a "special fund."    With regard to the alleged undue delegation of legislative power, the Court finds that the provision conferring the authority upon the ERB to impose additional amounts on petroleum products provides a sufficient standard by which the authority must be exercised. In addition to the general policy of the law to protect the local consumer by stabilizing and subsidizing domestic pump rates, P.D. 1956 expressly authorizes the ERB to impose additional amounts to augment the resources of the Fund.__________-Osmena v Orbos

" To avoid the taint of unlawful delegation of the power to tax, there must be a standard which implies that the legislature determines matter of principle and lays down fundamental policy."

FACTS: Senator John Osmeña assails the constitutionality of paragraph 1c of PD 1956, as

amended by EO 137, empowering the Energy Regulatory Board (ERB) to approve the increase of fuel prices or impose additional amounts on petroleum products which proceeds shall accrue to the Oil Price Stabilization Fund (OPSF) established for the reimbursement to ailing oil companies in the event of sudden price increases. The petitioner avers that the collection on oil products establishments is an undue and invalid delegation of legislative power to tax. Further, the petitioner points out that since a 'special fund' consists of monies collected through the taxing power of a State, such amounts belong to the State, although the use thereof is limited to the special purpose/objective for which it was created. It thus appears that the challenge posed by the petitioner is premised primarily on the view that the powers granted to the ERB under P.D. 1956, as amended, partake of the nature of the taxation power of the State.

ISSUE: Is there an undue delegation of the legislative power of taxation?

HELD: None. It seems clear that while the funds collected may be referred to as taxes, they are exacted in the exercise of the police power of the State. Moreover, that the OPSF as a special fund is plain from the special treatment given it by E.O. 137. It is segregated from the general fund; and while it is placed in what the law refers to as a "trust liability account," the fund nonetheless remains subject to the scrutiny and review of the COA. The Court is satisfied that these measures comply with the constitutional description of a "special fund."    With regard to the alleged undue delegation of legislative power, the Court finds that the provision conferring the authority upon the ERB to impose additional amounts on petroleum products provides a sufficient standard by which the authority must be exercised. In addition to the general policy of the law to protect the local consumer by stabilizing and subsidizing domestic pump rates, P.D. 1956 expressly authorizes the ERB to impose additional amounts to augment the resources of the Fund.__________-

LUTZ v. ARANETA

GR No. L-7859, December 22, 1955

98 PHIL 148

FACTS: Plaintiff Walter Lutz, in his capacity as judicial administrator of the intestate estate of Antionio Ledesma,sought to recover from the CIR the sum of P14,666.40 paid by the estate as taxes, under section 3 of the CA567 or the Sugar Adjustment Act thereby assailing its constitutionality, for it provided for an increase of theexisting tax on the manufacture of sugar, alleging that such enactment is not being levied for a public purpose but solely and exclusively for the aid and support of the sugar industry thus making it void and unconstitutional.The sugar industry situation at the time of the enactment was in an imminent threat of loss and needed to bestabilized by imposition of emergency measures.

ISSUE: Is CA 567 constitutional, despite its being allegedly violative of the equal protection clause, the purpose ofwhich is not for the benefit of the general public but for the rehabilitation only of the sugar industry?

HELD: Yes. The protection and promotion of the sugar industry is a matter of public concern, it follows that theLegislature may determine within reasonable bounds what is necessary for its protection and expedient for itspromotion. Here, the legislative discretion must be allowed to fully play, subject only to the test ofreasonableness; and it is not contended that the means provided in the law bear no relation to the objectivepursued or are oppressive in character. If objective and methods are alike constitutionally valid, no reason is seenwhy the state may not levy taxes to raise funds for their prosecution and attainment. Taxation may be made theimplement of the state's police power.

____--

Sison vs Ancheta

GR No. L-59431, 25 July 1984

Facts: Section 1 of BP Blg 135 amended the Tax Code and petitioner Antero M. Sison, as taxpayer, alleges that "he would be unduly discriminated against by the imposition of higher rates of tax upon his income arising from the exercise of his profession vis-a-vis those which are imposed upon fixed income or salaried individual taxpayers. He characterizes said provision as arbitrary amounting to class legislation, oppressive and capricious in character. It therefore violates both the equal protection and due process clauses of the Constitution as well asof the rule requiring uniformity in taxation.

Issue: Whether or not the assailed provision violates the equal protection and due process clauses of the Constitution while also violating the rule that taxes must be uniform and equitable.

Held: The petition is without merit.On due process - it is undoubted that it may be invoked where a taxing statute is so arbitrary that it finds no support in the Constitution. An obvious example is where it can be shown to amount to the confiscation of property from abuse of power. Petitioner alleges arbitrariness but his mere allegation does not suffice and there must be a factual foundation of such unconsitutional taint.On equal protection - it suffices that the laws operate equally and uniformly on all persons under similar circumstances, both in the privileges conferred and the liabilities imposed.On the matter that the rule of taxation shall be uniform and equitable - this requirement is met when the tax operates with the same force and effect in every place where the subject may be found." Also, :the rule of uniformity

does not call for perfect uniformity or perfect equality, because this is hardly unattainable." When the problem of classification became of issue, the Court said: "Equality and uniformity in taxation means that all taxable articles or kinds of property of the same class shall be taxed the same rate. The taxing power has the authority to make reasonable and natural classifications for purposes of taxation..." As provided by this Court, where "the differentation" complained of "conforms to the practical dictates of justice and equity" it "is not discriminatory within the meaning of this clause and is therefore uniform."