SC: Microsoft not entitled to P11M tax refund

By Tetch Torres INQUIRER.net
First Posted 10:53:00 04/27/2011

MANILA, Philippines—The Supreme Court has affirmed the decision of the Court of Tax Appeals (CTA) that Microsoft Philippines was not entitled to an P11-million tax refund for taxes paid in 2001.

In a nine-page decision dated April 5 but was made public Tuesday, the high court’s second division through Senior Associate Justice Antonio Carpio said Microsoft Philippines failed to prove that it is was entitled to a tax refund due to its non-compliance with the requirements set forth under the National Internal Revenue Regulations Code (NIRC).

Under the law, the high court explained that a VAT registered taxpayer such as Microsoft Philippines is required to comply with all the VAT invoicing requirements to be able to file a claim for input taxes on domestic purchases for goods or services attributable to zero-rated sales.

A VAT invoice meets the requirements under the law and that of the Revenue Regulations.

Microsoft argued in its petition for review that the law failed to indicate that failure to indicate the word “zero-rated” in its invoices or receipts would result in the outright invalidation of the invoices or receipts and the disallowance of a claim for tax credit or refund.

“A tax credit or refund, like tax exemption, is strictly construed against the taxpayer. The taxpayer claiming the tax credit or refund has the burden of proving that he is entitled to the refund or credit,” the high court said.

In this case, burden of proof that Microsoft Philippines was entitled to a refund or credit could be shown by compliance with the requirements set forth under the law.

An input tax is defined under the NIRC as the “VAT due from or paid by a VAT registered person in the course of his trade or business of importation of goods or local purchase of goods or services including lease or use of property from a VAT registered person.”

This is deducted from the output tax which is the “VAT due on the sale or lease of taxable goods or properties or services by any VAT registered taxpayer” in order to arrive to a VAT payable amount.

But in zero-rated transactions, output tax is multiplied by zero percent thus when input tax is deducted from output tax would result in an excess input tax which may be refunded or credited to other internal revenue taxes upon compliance with all the requirements stated under the law.

In this case, Microsoft paid a VAT input tax worth P11, 449, 814.99 on its domestic purchases of taxable goods and services in 2001.

The company claimed it as a tax credit in 2002 but due to the inaction of the Bureau of Internal Revenue (BIR), the company took their case to the CTA which ruled against them.

The CTA said Microsoft’s official receipts failed to indicate the word “zero rated” on its face thus it cannot be considered as valid evidence to prove zero-rated sales for VAT purposes.”

After their motion for reconsideration was dismissed by the CTA en banc, they went to the Supreme Court.

“The appearance of the word ‘zero-rated’ on the face of invoices covering zero-rated sales prevents buyers from falsely claiming input VAT from their purchases when no VAT is actually paid. Absent such word, the government may be refunding taxes it did not collect,” the high court said.

PNOY may soon appoint two new SC Justices

Associate Justices of the Supreme Court (SC) Conchita Carpio-Morales and Antonio Eduardo Nachura are set to retire this coming June 19 and June 13 respectively.

The impending retirement of the two justices will increase President Noynoy Aquino’s appointees to the Supreme Court making it to a total of three. The first was Associate Justice Ma. Lourdes Sereno. Before the appointment of Sereno, all of the 15 Justices which comprise the entire tribunal were appointed by former president Gloria Arroyo.

The Judicial and Bar Council of the Philippines is a constitutionally-created body that recommends appointees for vacancies that may arise in the composition of the Supreme Court and other lower courts.

It is composed of a representative of the Integrated Bar, a professor of law, a retired member of the Supreme Court, and a representative of the private sector. The Secretary of Justice and a representative of Congress are ex-officio members while the Chief Justice of the Supreme Court is the ex-officio Chairman. The Clerk of the Supreme Court shall serve as the ex-officio secretary.

Land Registration Authority (LRA) now under Department of Justice (DOJ)

President Noynoy Aquino (PNOY) transferred the Land Registration Authority (LRA) to the Department of Justice (DOJ) by virtue of Executive Order No. 30 which was dated March 14, 2011.

The LRA was formerly under the Department of Environment and Natural Resources (DENR). Read the full text of the Order below.

MALACAÑAN PALACEMANILA

BY THE PRESIDENT OF THE PHILIPPINES

EXECUTIVE ORDER NO. 30

TRANSFERRING THE LAND REGISTRATION AUTHORITY (LRA) FROM THE DEPARTMENT OF ENVIRONMENT AND NATURAL RESOURCES (DENR) TO THE DEPARTMENT OF JUSTICE (DOJ), REPEALING FOR THE PURPOSE EXECUTIVE ORDER NO. 690, SERIES OF 2007

WHEREAS, the Land Registration Authority (LRA) was transferred to the Department of Environment and Natural Resources (DENR) pursuant to Executive Order No. 690, dated December 28, 2007;

WHEREAS, the government is committed to pursue a more responsive and efficient bureaucracy by adopting homogenous grouping of functionally related government agencies;

WHEREAS, with due regard to the quasi-judicial functions being performed by the LRA in land registration cases, and given the present mandate, organizational capability, expertise and experience of the LRA and its Registries of Deeds throughout the country, it is more appropriate that the LRA and its Registries of Deeds continue to perform its land registration functions under the Department of Justice (DOJ);

WHEREAS, Section 31, Chapter 10, Title Ill, Book Ill of Executive Order No. 292, series of 1987, otherwise known as the “Administrative Code of 1987″, provides that the President, subject to the policy in the Executive Office and in order to achieve simplicity, economy and efficiency, shall have continuing authority to reorganize the administrative structure of the Office of the President.

NOW, THEREFORE, I, BENIGNO S. AQUINO Ill, President of the Philippines, by virtue of the powers vested in me by the Constitution and existing laws, do hereby order:

Section 1. Transferring LRA from DENR to the DOJ. – The LRA is hereby transferred from the DENR to the DOJ in order to ensure a more effective and efficient execution of laws relative to land registration.

Section 2. Repealing Clause. – All executive orders, including Executive Order No. 690, series of 2007, rules and regulation, and other issuances or parts thereof that are inconsistent with the provisions of this Executive Order, are hereby either revoked or modified accordingly.

Section 3. Effectivity -This Executive Order shall take effect immediately upon publication in the Official Gazette or in a newspaper of general circulation.

DONE in the City of Manila, this 14th day of March, in the year of Our Lord, Two Thousand and Eleven


By the President:

(Sgd.) BENIGNO S. AQUINO III

(Sgd.) PAQUITO N. OCHOA, JR.

Executive Secretary



SC: Cityhood Laws Constitutional

It’s final. The 16 Cityhood Laws are constitutional.
The Supreme Court, by a vote of 7-6, denied for lack of merit and with finality the Ad Cautelam Motion for Reconsideration of its February 15, 2011 ruling that declared constitutional RA Nos. 9389 (Baybay City in Leyte), 9390 (Bogo City in Cebu), 9391 (Catbalogan City in Samar), 9392 (Tandag City in Surigao del Sur), 9393 (Lamitan City in Basilan), 9394 (Borongan City in Samar), 9398 (Tayabas City in Quezon), 9404 (Tabuk City in Kalinga), 9405 (Bayugan City in Agusan del Sur), 9407 (Batac City in Ilocos Norte), 9408 (Mati City in Davao Oriental), 9409 (Guihulngan City in Negros Oriental), 9434 (Cabadbaran City in Agusan del Norte), 9435 (El Salvador City in Misamis Oriental), 9436 (Carcar City in Cebu), and 9491 (Naga City in Cebu).

In a 26-page resolution penned by Justice Lucas P. Bersamin, who also penned the February 15, 2011 resolution, the Court maintained that the said Cityhood Laws do not violate Art. X, sections 6 and 10 and the equal protection clause of the Constitution.

“We should not ever lose sight of the fact that the 16 cities covered by the Cityhood Laws not only had conversion bills pending during the 11th Congress, but have also complied with the requirements of the [Local Government Code] LGC prescribed prior to its amendment by RA No. 9009. Congress undeniably gave these cities all the considerations that justice and fair play demanded. Hence, this Court should do no less by stamping its imprimatur to the clear and unmistakable legislative intent and by duly recognizing the certain collective wisdom of Congress,” the Court said.

The Court stressed that Congress clearly intended that the local government units covered by the Cityhood Laws be exempted from the coverage of RA 9009, which imposes a higher income requirement of PhP100 million for the creation of cities.

The Court reiterated that while RA 9009 was being deliberated upon, the Congress was well aware of the pendency of conversion bills of several municipalities, including those covered by the Cityhood Laws. It pointed out that RA 9009 took effect on June 30, 2001, when the 12th Congress was incipient. By reason of the clear legislative intent to exempt the municipalities covered by the conversion bills pending during the 11th Congress, the House of Representatives adopted Joint Resolution No. 29 entitled Joint Resolution to Exempt Certain Municipalities Embodied in Bills Filed in Congress before June 30, 2001 from the coverage of Republic Act No. 9009. However, the Senate failed to act on the said Joint Resolution. Even so, the House readopted Joint Resolution No. 29 as Joint Resolution No. 1 during the 12th Congress, and forwarded the same for approval to the Senate, which again failed to prove it. Eventually, the conversion bills of respondents were individually filed in the Lower House and were all unanimously and favorably voted upon. When forwarded to the Senate, the bills were also unanimously approved. The acts of both Chambers of Congress show that the exemption clauses ultimately incorporated in the Cityhood Laws are but the express articulations of the clear legislative intent to exempt the respondents, without exception, from the coverage of RA No. 9009. Thereby, RA 9009, and, by necessity, the LCG, were amended, not by repeal but by way of the express exemptions being embodied in the exemption clauses.

The Court held that the imposition of the income requirement of P100 million from local sources under RA 9009 was arbitrary. When the sponsor of the law chose the specific figure of P100 million, no research or empirical date buttressed the figure. Nor was there proof that the proposal took into account the after-effects that were likely to arise. While the Constitution mandates that the creation of local government units must comply with the criteria laid down in the LGC, it cannot be justified to insist that the Constitution must have to yield to every amendment to the LGC despite such amendment imminently producing effects contrary to the original thrusts of the LGC to promote autonomy, decentralization, countryside development, and the concomitant national growth.

In its February 15 resolution, the Court granted the motion for reconsideration of its August 24, 2010 resolution filed by respondents Municipality of Baybay, et al. Hence, it reversed and set aside its August 24, 2010 resolution and declared constitutional the Cityhood Laws. It held that it “should not be restricted by technical rules of procedure at the expense of the transcendental interest of justice and equity. While it is true that litigation must end, even at the expense of errors in judgment, it is nobler rather for this Court of last resort, as vanguard of truth, to toil in order to dispel apprehensions and doubt.”

The February 15, 2011 resolution is the fourth ruling since the High Court first resolved the Cityhood case in 2008.

The cases at bar were spawned by the consolidated petitions filed by the League of Cities of the Philippines (LCP), et al. On November 18, 2008, the Court, by a 6-5 vote, granted the petitions and struck down the Cityhood Laws as unconstitutional for violating sections 10 and 6, Art. X, and the equal protection clause.

On March 31, 2009, the Court, by a 7-5 vote, denied the first motion for reconsideration.

On April 28, 2009, the Court, with a 6-6 vote, denied a second motion for reconsideration for being a prohibited pleading. However, the Court, in its June 2, 2009 resolution, clarified its April 28, 2009 resolution that it voted on the second motion for reconsideration and that it allowed the filing of the second MR, hence, the second MR was no longer a prohibited pleading. However, for lack or the required number of votes to overturn the November 18, 20009 decision and March 31, 2009 resolution, the Court denied the second MR in its April 28, 2009 resolution.

On December 21, 2009, the Court, by a vote of 6-4, declared the Cityhood Laws as constitutional.

On August 24, 2010, the Court, this time by a vote of 7-6, resolved the Ad Cautelam Motion for Reconsideration and Motion to Annul the Decision of December 21, 2009, both filed by petitioners, and the Ad Cautelam Motion for Reconsideration filed by petitioners-in-intervention Batangas City, et al., reinstating the November 18, 2008 decision.

Concurring with Justice Bersamin were Chief Justice Renato C. Corona and Justices Presbitero J. Velasco, Jr., Teresita J. Leonardo-De Castro, Jose Portugal Perez, and Jose Catral Mendoza. Justice Roberto A. Abad wrote a separate concurring opinion.

Senior Justice Antonio T. Carpio maintained his dissent and was joined in his opinion by Justices Conchita Carpio Morales, Arturo D. Brion, Diosdado M. Peralta, Martin S. Villarama, Jr., and Maria Lourdes P. A. Sereno.

Justices Antonio Eduardo B. Nachura and Mariano C. Del Castillo did not take part.

Justice Carpio opined that the said Cityhood Laws contravene the letter and intent of Section 10, Article X of the Constitution. He stressed that “the Constitution expressly requires Congress to stipulate in the Local Government Code itself all the criteria necessary for the creation of a city, including the conversion of a municipality into a city. To avoid discrimination and ensure uniformity and equality, such criteria cannot be embodied in any other law except the Local Government Code. In this case, the Cityhood Laws, which are unmistakably laws other than the Local Government Code, provide an exemption from the increased income requirement for the creation of cities under 450 of the Local Government Code, as amended by RA No. 9009.” He said that “This Court has made history with its repeated flip-flopping in this case.”

For his part, Justice Abad opined that there was no flip-flopping and that such charge was unfair. To flip-flop, he pointed out, “means to vote for one proposition at first (take a stand), shift to the opposite proposition upon the second vote (flip), and revert to his first position upon the third (flop). Not one of the 23 Justices flipped-flopped in his vote. He stressed that “the Justices did not decide to change their minds on a mere whim. The two sides filed motions for reconsideration in the case and the Justices had no options, considering their divided views, but perform their duties and vote on the same on the dates the matters came up for resolution.” He stressed that of the 23 Justices who voted in the case at any of its various stages, 20 Justices stood by their original positions and never reconsidered their views. Only three did so and not on the same occasion, showing not wholesale change of votes at any time. He noted that in 2009 alone, seven Justices retired and were replaced by an equal number. It is such that the resulting change in the combination of minds produced multiple shifts in the outcomes of the voting. He said that no law or rule requires succeeding Justices to adopt the views of their predecessors.

He said that the three Justices who changed their votes did not do so in one direction. Justice Velasco changed his vote from a vote to annul to a vote to uphold; Justice Villarama from a vote to uphold to a vote to annul; and Justice Mendoza from a vote to annul to a vote to uphold. Not one of the three flipped-flopped since they never changed their votes again afterwards. “[N]o one can dispute the right of a judge, acting on a motion for reconsideration, to change his mind regarding the case. The rules are cognizant of the fact that human judges could err and that it would merely be fair and right for them to correct their perceived errors upon a motion for reconsideration. The three Justices who changed their votes had the right to do so,” Justice Abad said. (GR No. 176951, League of City of the Philippines v. COMELEC; GR No. 177499, League of City of the Philippines v. COMELEC: GR No. 178056, League of City of the Philippines v. COMELEC, April 12, 2011)


Source: http://sc.judiciary.gov.ph/news/courtnews%20flash/2011/04/04141101.php

Option to carry-over excess income tax payments to the succeeding years once made becomes irrevocable

Under Section 76 of the 1997 National Internal Revenue Code (NIRC), once an option to carry-over excess income tax payments to the succeeding years, it becomes irrevocable. This was what the Supreme Court reiterated in its new decision in the case of Belle Corporation vs. Commissioner of Internal Revenue, G.R. No. 181298 promulgated last January 10, 2011.

The issue passed upon by the Court is whether petitioner is entitled to a refund of its excess income tax payments for the taxable year 1997 in the amount of P106,447,318.00.

In denying petitioner Belle Corp.’s Petition for Certiorari under Rule 45 of the Rules of Court, the highest tribunal of the land opined that since petitioner already carried over its 1997 excess income tax payments to the succeeding taxable year 1998, it may no longer file a claim for refund of unutilized tax credits for taxable year 1997.

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

Read the FULL TEXT

Minimum Corporate Income Tax

"Minimum corporate tax"


By Raul J. Palabrica
Philippine Daily Inquirer
First Posted 20:55:00 04/08/2010
Filed Under: State Budget & Taxes, Economy and Business and Finance

IT’S INCOME TAX SEASON AGAIN.

This is the time of the year when accountants are busiest preparing (or as some cynics put it, “cooking”) the books of account of their clients to meet their tax obligations.

In doing so, the “bean counters” have to carefully tread the thin line that separates tax avoidance from tax evasion.

If there are gray areas in the law that can be invoked to reduce or avoid the payment of taxes, the taxpayer concerned cannot be faulted for taking advantage of them.

For making some “savings” possible, the tax adviser who spotted the loophole can expect to be rewarded handsomely for his cleverness.

And when word spreads in the industry about it, similarly situated taxpayers follow suit until the regulators get wise to the scheme and adopt the appropriate measures to stem the revenue loss.

Tax evasion, however, is a different story. The refusal to pay taxes that are due and payable can give rise to criminal and civil liabilities to the taxpayer and whoever may have advised him to willfully renege on his tax duties.

Low taxes

Until our lawmakers took notice, it was common practice by unscrupulous businessmen to form corporations that raked in huge profits during the year but reported losses at the end of their fiscal year.

Following the principle that income tax is imposable only on earned income, these companies were not, strictly speaking, obliged to pay taxes.

Behind the scenes, however, the bulk of their earnings went to the pockets of their stockholders and officers (who are also stockholders) by way of dividends, salaries, allowances and other perks and privileges.

With sleight-of-hand accounting techniques, the supposedly employment-based expenses were added to bloated operating costs that resulted, at least in the corporate books, in low income or losses.

The net effect of this slick scheme was low or zero taxes.

Either way it went, these companies availed of the services and facilities that the government made available to all companies regardless of their financial condition.

Thus, supposedly unprofitable companies enjoyed the benefits of public services and facilities without contributing any centavo to the national coffers. It was corporate parasitism and exploitation at their worst.

Taxable year

To even up the balance and to discourage avoidance of taxes by repeated reporting of losses, Republic Act No. 8424 imposed in 1998 a minimum corporate income tax (MCIT) on domestic corporations.

Basically, the law gives new corporations some breathing space by allowing them to invoke business losses to excuse the payment of the standard corporate income tax.

However, on the fourth taxable year immediately following the year in which these corporations started operating, they are required to pay the MCIT which is equivalent to two percent of their gross income as of the end of the taxable year.

The specifics on how the tax shall be computed and paid are spelled out in the regulations that the Bureau of Internal Revenue later issued to implement the law.

The bottom line of the law is, all corporations, regardless of their state of profitability, have to pay income tax using a formula that takes into account their actual income stream during the taxable year.

Understandably, the affected parties complained about the innovative tax regulation. A convenient excuse for avoiding (if not evading) taxes—business losses—was removed from the tax books.


Valid exercise

Last month, the Supreme Court settled the issue on the constitutionality of the MCIT.

Earlier, an association of real estate brokers claimed that the tax imposition is “highly oppressive, arbitrary and confiscatory.”

In its ruling, the tribunal pointedly stated that some companies deliberately manipulate their books to report negative or minimal taxable income by “under declarations in income earned or over deduction in expenses.”

With that premise, the justices said the MCIT is aimed at deterring tax evasion and reducing the incidence of tax avoidance schemes that are “achieved through sophisticated and artful manipulations of deductions and other stratagems.”

Since the MCIT is based on the companies’ gross income (or total earnings before deducting allowable expenses), the tribunal did not see anything wrong with requiring them to contribute a reasonable portion of their money to the national coffers.

The decision couldn’t have come at a more opportune time considering that the BIR is presently engaged in aggressive efforts to meet its revenue target for the year.

It has been said (and with sufficient reason) that government regulation of business activities is a catch-up game.

The regulated parties devise ways and means to go around the rules that restrict their ability to make a lot of money. In turn, the regulators try to anticipate these moves to enable them to take the appropriate remedial measures.

Mercifully, in the tax collection game, the government has in its corner the presumption that “taxes constitute the lifeblood of the State” and therefore all doubts about its power to tax are resolved in its favor.

Source: Inquirer.net

Civil Service Examination Schedule for 2011

The 2011 Civil Service Exam is scheduled on May 22, 2011 and October 16, 2011. This is for the Career Service Examination Paper and Pencil Test (Professional and Subprofessional)

Case Digest in Evidence (Remedial Law): BPI vs. Reyes

BANK OF THE PHILIPPINE ISLANDS vs. JESUSA P. REYES and CONRADO B. REYES

[G.R. No. 157177, February 11, 2008]

FACTS:

On December 7, 1990, respondent Jesusa Reyes together with her daughter, went to BPI Zapote Branch to open an ATM account.

Respondent informed one of petitioners employees, Mr. Capati, that they wanted to open an ATM account for the amount of P200,000.00, P100,000.00 of which shall be withdrawn from her exiting savings account with BPI bank which is account no. 0233-2433-88 and the other P100,000.00 will be given by her in cash.

Capati allegedly made a mistake and prepared a withdrawal slip for P200,00.00 to be withdrawn from her existing savings account with said bank and the respondent believing in good faith that Capati prepared the papers with the correct amount signed the same unaware of the mistakes in figures.

Minutes later after the slips were presented to the teller, Capati returned to where the respondent was seating and informed the latter that the withdrawable balance could not accommodate P200,000.00.

Respondent explained that she is withdrawing the amount of P100,000.00 only and then changed and correct the figure two (2) into one (1) with her signature super-imposed thereto signifying the change, afterwhich the amount of P100,000.00 in cash in two bundles containing 100 pieces of P500.00 peso bill were given to Capati with her daughter Joan witnessing the same. Thereafter Capati prepared a deposit slip for P200,000.00 in the name of resondent Jesusa Reyes with the new account no. 0235-0767-48 and brought the same to the teller's booth.

After a while, he returned and handed to the respondent her duplicate copy of her deposit to account no. 0235-0767-48 reflecting the amount of P200,000.00 with receipt stamp showing December 7, as the date.

Later on, respondent would become aware that her ATM account only contained the amount of P100,000.00 with interest. Hence, she filed an action before the RTC.

Petitioner claimed that there was actually no cash involved with the transactions which happened on December 7, 1990 as contained in the bank’s teller tape.

On August 12, 1994, the RTC issued a Decision upholding the versions of respondents.

Aggrieved, petitioner appealed to the CA which affirmed the RTC decision with modification

ISSUE:

Whether the CA erred in sustaining the RTC's finding that respondent Jesusa made an initial deposit of P200,000.00 in her newly opened Express Teller account on December 7, 1990.

HELD:

It is a basic rule in evidence that each party to a case must prove his own affirmative allegations by the degree of evidence required by law. In civil cases, the party having the burden of proof must establish his case by preponderance of evidence, or that evidence which is of greater weight or is more convincing than that which is in opposition to it. It does not mean absolute truth; rather, it means that the testimony of one side is more believable than that of the other side, and that the probability of truth is on one side than on the other.

For a better perspective on the calibration of the evidence on hand, it must first be stressed that the judge who had heard and seen the witnesses testify was not the same judge who penned the decision. Thus, not having heard the testimonies himself, the trial judge or the appellate court would not be in a better position than this Court to assess the credibility of witnesses on the basis of their demeanor.

Hence, to arrive at the truth, we thoroughly reviewed the transcripts of the witnesses' testimonies and examined the pieces of evidence on record.

After a careful and close examination of the records and evidence presented by the parties, we find that respondents failed to successfully prove by preponderance of evidence that respondent Jesusa made an initial deposit of P200,000.00 in her Express Teller account.

Case Digest in Evidence (Remedial Law): Atlas vs. Commisioner

ATLAS CONSOLIDATED MINING AND DEVELOPMENT CORP. vs. COMMISSIONER OF INTERNAL REVENUE


[G.R. No. 159490, February 18, 2008]

FACTS:

Atlas is a corporation duly organized and existing under Philippine laws engaged in the production of copper concentrates for export.

Atlas applied with the BIR for the issuance of a tax credit certificate or refund under Section 106(b) of the Tax Code.

Atlas then filed a petition for review with the CTA on February 22, 1995 to prevent the running of the prescriptive period under Sec. 230 of the Tax Code.

On October 13, 1997, the CTA rendered a Decision denying Atlas’ claim for tax credit or refund.

Respondent CIR filed his Answer asserting that Atlas has the burden of proving erroneous or illegal payment of the tax being claimed for refund, as claims for refund are strictly construed against the taxpayer

In denying Atlas’ claim for tax credit or refund, the CTA held that Atlas failed to present sufficient evidence to warrant the grant of tax credit or refund for the alleged input taxes paid by Atlas. Relying on Revenue Regulation No. (RR) 3-88 which was issued to implement the then VAT law and list the documents to be submitted in actions for refunds or tax credits of input taxes in export sales, it found that the documents submitted by Atlas did not comply with said regulation. It pointed out that Atlas failed to submit photocopies of export documents, invoices, or receipts evidencing the sale of goods and others.

Atlas timely filed its Motion for Reconsideration of the above decision contending that it relied on Sec. 106 of the Tax Code which merely required proof that the foreign exchange proceeds has been accounted for in accordance with the regulations of the Central Bank of the Philippines. Consequently, Atlas asserted that the documents it presented, coupled with the testimony of its Accounting and Finance Manager sufficiently proved its case. It argued that RR 3-88 was issued for claims for refund of input VAT to be processed by the BIR, that is, for administrative claims, and not for judicial claims as in the present case. Anyhow, Atlas prayed for a re-trial, even as it admitted that it has committed a mistake or excusable negligence when the CTA ruled that RR 3-88 should be the one applied for Atlas to submit the basis required under the regulation.

On Atlas’ appeal, the CA denied and dismissed Atlas’ petition on the ground of insufficiency of evidence to support Atlas’ action for tax credit or refund.

ISSUE: Whether Atlas has sufficiently proven entitlement to a tax credit or refund.

HELD:

No.

The Rules of Court, which is suppletory in quasi-judicial proceedings, particularly Sec. 349 of Rule 132, Revised Rules on Evidence, is clear that no evidence which has not been formally offered shall be considered. Thus, where the pertinent invoices or receipts purportedly evidencing the VAT paid by Atlas were not submitted, the courts a quo evidently could not determine the veracity of the input VAT Atlas has paid. Moreover, when Atlas likewise failed to submit pertinent export documents to prove actual export sales with due certification from accredited banks on the export proceeds in foreign currency with the corresponding conversion rate into Philippine currency, the courts a quo likewise could not determine the veracity of the export sales as indicated in Atlas’ amended VAT return.

It must be noted that the most competent evidence must be adduced and presented to prove the allegations in a complaint, petition, or protest before a judicial court. And where the best evidence cannot be submitted, secondary evidence may be presented. In the instant case, the pertinent documents which are the best pieces of evidence were not presented.

Tax raps filed vs billionaire businessman

By Tetch Torres
INQUIRER.net
First Posted 18:28:00 04/07/2011

MANILA, Philippines—The Department of Justice (DoJ) ordered the filing of tax evasion case against a billionaire businessman before the Court of Tax Appeals.

In an 8-page resolution approved by Prosecutor General Claro Arellano, the DoJ gave the go for the prosecution of Macario Lim Gaw for violation of Section 255 of the National Internal Revenue Code (NIRC); which provides penalty for a tax payer’s failure to file return; supply correct and accurate information; pay tax withhold and remit tax and refund excess taxes withheld on compensation.

The resolution is dated March 17, 2011, but was released to the media on Thursday through a press conference by Justice Secretary Leila De Lima.

In December, 2007 and from April to June, 2008, Gaw bought a total of 10 properties consisting of an aggregate area of 19.5592 hectares from which he sold in July, 2008.

The DoJ, in its resolution stated that Gaw failed to pay the corresponding tax for the income he earned for the sale of the said properties.

Gaw said that he already paid the corresponding capital gains tax as he insisted that the sold properties were capital assets and not ordinary assets as claimed by the Bureau of Internal Revenue (BIR).

Gaw paid the 6 percent capital gains tax amounting to P9,111,801.69 for 2007 and P418,746,021.11 for 2008 to evade the payment of the 32 percent income tax and the 12 percent VAT due to sale of lands classified as ordinary assets.

However, the DoJ pointed that evidence showed the transactions of Gaw, as well as his continuing transactions showed he is engaged in real estate business under the BIR revenue regulation 7-2003.

“While respondent would insist that the revenue regulation merely pertains to selling and not buying, the revenue regulation does not distinguish since the revenue regulation itself states that the property purchased for future use in the business, even though this purpose is later thwarted by circumstances beyond the taxpayer’s control, does not lose its character as an ordinary asset,” the DoJ said.

The DoJ added that Gaw himself, in an agreement to sell dated April 3, 2008, which he submitted to the DoJ showed that he is actually into business of selling real properties for profit.

The BIR said Gaw is registered as a one-time transaction tax payer which, according to the BIR are those who are selling properties which is not in the nature of a regular business transaction.

But the DoJ reiterated the statement made by the BIR that Gaw has extensive knowledge in real-estate business having handled nine real-estate transactions for various corporations.

Gaw is the president of Mega Packaging Corp. and Makro LPG.

BIR files tax evasion case against model-host Diana Menezes

Model and host Diana Menezes faces a tax evasion case for failing to file her income tax returns considering that she is a resident alien deriving income from within the Philippines and thus liable under Section 24 of the National Internal Revenue Code (NIRC) to pay income taxes.

Read article below.

"Brazilian TV host slapped with tax evasion rap"
By Tetch Torres
INQUIRER.net
First Posted 13:54:00 04/07/2011

MANILA, Philippines—The Bureau of Internal Revenue on Thursday filed a tax evasion case against Brazilian model and host Diana Menezes before the Department of Justice for her failure to file tax returns and pay taxes.

Menezes’ tax liability amounts to P983,658.07, said the BIR.

Menezes has been in the country since 2007 and has been a regular host of the noontime television show “Eat Bulaga” also since 2007.

Investigation showed that Menezes did not file any tax returns for taxable years 2007 to 2009. Under Section 24 of the National Internal Revenue Code (NIRC), a resident alien deriving income from the Philippines is required to pay income tax.

Records showed that Menezes received a total taxable income of P2.6 million from 2007 to 2009 from various modeling and hosting stints and endorsements but failed to pay taxes.

BIR Commissioner Kim Jacinto-Henares said that Menezes registered with the BIR under Executive Order No. 98 only for the purpose of securing a Taxpayer Identification Number (TIN) as part of the essential requirements in all applications for a government permit, license, clearance or any official documents.

Sandiganbayan Convicts A Prosecutor for Bribery

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"Dagupan prosecutor convicted of bribery"

By Tetch Torres
INQUIRER.net
First Posted 17:31:00 03/24/2011
Filed Under: Judiciary (system of justice), Graft & Corruption, Bribery

MANILA, Philippines--The Sandiganbayan has convicted a Dagupan City public prosecutor for demanding and receiving P20,000 bribe money from a person who had a pending case before his office in 2005.

In a 30-page decision released Thursday, the anti-graft court’s fourth division, through Associate Justice Maria Cristina Cornejo, found Assistant Prosecutor Joselito Barrozo guilty of direct bribery and sentenced him to four to nine years, four months and one day of imprisonment.

Barrozo was also slapped a P60,000 fine, and he cannot exercise his right to vote and hold public office during the duration of his sentence.

Barrozo was arrested in February 2005 in an entrapment operation conducted by the National Bureau of Investigation after a complaint was filed by Jennie Valeriano, a respondent to several estafa and bouncing checks cases pending before Barrozo’s office.

Barrozo dismissed the estafa cases and demanded from Valeriano the said amount as his fee in resolving the case in her favor.

“Accused Barrozo accepted the money given to him by Valeriano under obviously suspicious circumstances. The money, as categorically stated by the giver (Valeriano), was given to and received by Barrozo in consideration of the dismissal of the cases which were the subject of preliminary investigation conducted by Barrozo…,” the decision stated.

The decision further said that “Barrozo’s act did not constitute a crime but was unjust as it was executed without regard to the evidence but simply in consideration of the amount demanded and received by him.”

PUP Law Professor Appointed as Court of Appeals Justice

Makati Regional Trial Court (RTC) Judge Zenaida G. Laguilles who has been teaching remedial law for years at the Polytechnic University of the Philippines (PUP) College of Law in Sta. Mesa, Manila was appointed just recently as an Associate Justice of the Court of Appeals.

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3 career judges take oath as new CA justices By Tetch Torres
INQUIRER.net
First Posted 12:52:00 03/22/2011
Filed Under: Benigno Aquino III, Judiciary (system of justice)

MANILA, Philippines—Three career judges took their oath before Chief Justice Renato Corona as the newly appointed Court of Appeals justices filling up the remaining three vacant posts in the appellate court.

The appointment was contained in a one page transmittal letter to the Supreme Court dated Mar. 21, 2011 of Executive Secretary Paquito N. Ochoa Jr.

Appointed as new appeals court justices were Manila Regional Trial Court Judge Carmelita Salandanan-Manahan, Makati RTC Judge Zenaida Galapate Laguilles and Cavite City RTC Judge Melchor Quirino C. Sadang.

Both Manahan and Laguilles have immediately taken their oath before Corona late Monday afternoon.

Manahan, a graduate of Manuel L. Quezon University passed the Bar exam in 1990. She worked at the Public Attorney’s Office then became a prosecutor before her stint as a judge. She was once a Judicial Excellence Awardee of the Justice Ramon Avancena Award, the highest honor given by the high court to career judges.

Laguilles meanwhile is an expert in Remedial Law. She teaches law in various law schools including the Polytechnic University of the Philippines.

She handled the case of the journalists who filed a P12.5 million class suit against First Gentleman Jose Miguel Arroyo on 28 December 2006 accusing him of abuse of right when he filed 11 libel suits against 46 mediamen. Laguilles junked Arroyo’s motion to dismiss the case.

Sadang, on the other hand, is the son of the late Judge Quirino Sadang. He is a member of the Upsilon Fraternity in the University of the Philippines, the fraternity group where the late President Ferdinand Marcos and Senator Benigno "Ninoy" Aquino Jr. belonged.

Earlier, President Benigno Aquino III already made appointments to fill up vacant seats at the Court of Appeals which included former Pasig RTC Abraham Borreta and Caloocan City RTC Judge Victoria Paredes, Cebu RTC Judge Gabriel Ingles and Pamela Ann Abella- Maxino.

The Court of Appeals is composed of 1 Presiding Justice and 68 Associate Justices pursuant to Republic Act 8246.

SOURCE: Inquirer.net

CASE DIGEST (Transportation Law): Lita Enterprises vs. Intermediate Appellate Court

LITA ENTERPRISES, INC., vs.INTERMEDIATE APPELLATE COURT, NICASIO M. OCAMPO and FRANCISCA P. GARCIA.
[G.R. No. L-64693 April 27, 1984]

FACTS:
Sometime in 1966, the spouses Nicasio M. Ocampo and Francisca Garcia, herein private respondents, purchased in installment from the Delta Motor Sales Corporation five (5) Toyota Corona Standard cars to be used as taxicabs. Since they had no franchise to operate taxicabs, they contracted with petitioner Lita Enterprises, Inc., through its representative, Manuel Concordia, for the use of the latter's certificate of public convenience in consideration of an initial payment of P1,000.00 and a monthly rental of P200.00 per taxicab unit. To effectuate Id agreement, the aforesaid cars were registered in the name of petitioner Lita Enterprises, Inc, Possession, however, remained with tile spouses Ocampo who operated and maintained the same under the name Acme Taxi, petitioner's trade name.

About a year later one of said taxicabs driven by their employee, Emeterio Martin, collided with a motorcycle whose driver, one Florante Galvez, died from the head injuries sustained therefrom. A criminal case was eventually filed against the driver Emeterio Martin, while a civil case for damages was instituted by Rosita Sebastian Vda. de Galvez, heir of the victim, against Lita Enterprises, Inc., as registered owner of the taxicab in the latter case. Petitioner Lita Enterprises, Inc. was adjudged liable for damages by the CFI.

This decision having become final, a writ of execution was issued. Two of the vehicles of respondent spouses were levied upon and sold at public auction.

Thereafter, Nicasio Ocampo decided to register his taxicabs in his name. He requested the manager of petitioner Lita Enterprises, Inc. to turn over the registration papers to him, but the latter allegedly refused. Hence, he and his wife filed a complaint against Lita Enterprises, Inc., Mrs. de Galvez and the Sheriff of Manila for reconveyance of motor vehicles with damages.

ISSUE: Whether or not petitioner has a cause of action against defendants.

HELD:
No.
Unquestionably, the parties herein operated under an arrangement, commonly known as the "kabit system", whereby a person who has been granted a certificate of convenience allows another person who owns motors vehicles to operate under such franchise for a fee. A certificate of public convenience is a special privilege conferred by the government . Abuse of this privilege by the grantees thereof cannot be countenanced. The "kabit system" has been Identified as one of the root causes of the prevalence of graft and corruption in the government transportation offices. In the words of Chief Justice Makalintal, "this is a pernicious system that cannot be too severely condemned. It constitutes an imposition upon the goo faith of the government.

Although not outrightly penalized as a criminal offense, the "kabit system" is invariably recognized as being contrary to public policy and, therefore, void and inexistent under Article 1409 of the Civil Code, It is a fundamental principle that the court will not aid either party to enforce an illegal contract, but will leave them both where it finds them. Upon this premise, it was flagrant error on the part of both the trial and appellate courts to have accorded the parties relief from their predicament. Article 1412 of the Civil Code denies them such aid. It provides:

ART. 1412. if the act in which the unlawful or forbidden cause consists does not constitute a criminal offense, the following rules shall be observed:

(1) when the fault, is on the part of both contracting parties, neither may recover what he has given by virtue of the contract, or demand the performance of the other's undertaking.

Having entered into an illegal contract, neither can seek relief from the courts, and each must bear the consequences of his acts.

The defect of inexistence of a contract is permanent and incurable, and cannot be cured by ratification or by prescription. As this Court said in Eugenio v. Perdido, "the mere lapse of time cannot give efficacy to contracts that are null void."

The principle of in pari delicto is well known not only in this jurisdiction but also in the United States where common law prevails. Under American jurisdiction, the doctrine is stated thus: "The proposition is universal that no action arises, in equity or at law, from an illegal contract; no suit can be maintained for its specific performance, or to recover the property agreed to be sold or delivered, or damages for its property agreed to be sold or delivered, or damages for its violation. The rule has sometimes been laid down as though it was equally universal, that where the parties are in pari delicto, no affirmative relief of any kind will be given to one against the other." Although certain exceptions to the rule are provided by law, We see no cogent reason why the full force of the rule should not be applied in the instant case.

CASE DIGEST (Transportation Law): Kilusang Mayo Uno vs. Garcia

KILUSANG MAYO UNO LABOR CENTER vs.HON. JESUS B. GARCIA, JR., the LAND TRANSPORTATION FRANCHISING AND REGULATORY BOARD, and the PROVINCIAL BUS OPERATORS ASSOCIATION OF THE PHILIPPINES G.R. No. 115381 December 23, 1994

FACTS :
Then Secretary of DOTC, Oscar M. Orbos, issued Memorandum Circular No. 90-395 to then LTFRB Chairman, Remedios A.S. Fernando allowing provincial bus operators to charge passengers rates within a range of 15% above and 15% below the LTFRB official rate for a period of one (1) year.

This range was later increased by LTFRB thru a Memorandum Circular No. 92-009 providing, among others, that "The existing authorized fare range system of plus or minus 15 per cent for provincial buses and jeepneys shall be widened to 20% and -25% limit in 1994 with the authorized fare to be replaced by an indicative or reference rate as the basis for the expanded fare range."

Sometime in March, 1994, private respondent PBOAP, availing itself of the deregulation policy of the DOTC allowing provincial bus operators to collect plus 20% and minus 25% of the prescribed fare without first having filed a petition for the purpose and without the benefit of a public hearing, announced a fare increase of twenty (20%) percent of the existing fares.

On March 16, 1994, petitioner KMU filed a petition before the LTFRB opposing the upward adjustment of bus fares, which the LTFRB dismissed for lack of merit.

ISSUE:
Whether or not the authority given by respondent LTFRB to provincial bus operators to set a fare range of plus or minus fifteen (15%) percent, later increased to plus twenty (20%) and minus twenty-five (-25%) percent, over and above the existing authorized fare without having to file a petition for the purpose, is unconstitutional, invalid and illegal.

HELD:
Yes.

x x x

Under section 16(c) of the Public Service Act, the Legislature delegated to the defunct Public Service Commission the power of fixing the rates of public services. Respondent LTFRB, the existing regulatory body today, is likewise vested with the same under Executive Order No. 202 dated June 19, 1987. x x x However, nowhere under the aforesaid provisions of law are the regulatory bodies, the PSC and LTFRB alike, authorized to delegate that power to a common carrier, a transport operator, or other public service.

CASE DIGEST (Transportation Law): Bantangas CATV vs. C.A.

BATANGAS CATV, INC. vs. THE COURT OF APPEALS, THE BATANGAS CITY SANGGUNIANG PANLUNGSOD and BATANGAS CITY MAYOR [G.R. No. 138810. September 29, 2004]

FACTS:
On July 28, 1986, respondent Sangguniang Panlungsod enacted Resolution No. 210 granting petitioner a permit to construct, install, and operate a CATV system in Batangas City. Section 8 of the Resolution provides that petitioner is authorized to charge its subscribers the maximum rates specified therein, “provided, however, that any increase of rates shall be subject to the approval of the Sangguniang Panlungsod.

Sometime in November 1993, petitioner increased its subscriber rates from P88.00 to P180.00 per month. As a result, respondent Mayor wrote petitioner a letter threatening to cancel its permit unless it secures the approval of respondent Sangguniang Panlungsod, pursuant to Resolution No. 210.

Petitioner then filed with the RTC, Branch 7, Batangas City, a petition for injunction alleging that respondent Sangguniang Panlungsod has no authority to regulate the subscriber rates charged by CATV operators because under Executive Order No. 205, the National Telecommunications Commission (NTC) has the sole authority to regulate the CATV operation in the Philippines.

ISSUE :
may a local government unit (LGU) regulate the subscriber rates charged by CATV operators within its territorial jurisdiction?

HELD: No.

x x x

The logical conclusion, therefore, is that in light of the above laws and E.O. No. 436, the NTC exercises regulatory power over CATV operators to the exclusion of other bodies.

x x x

Like any other enterprise, CATV operation maybe regulated by LGUs under the general welfare clause. This is primarily because the CATV system commits the indiscretion of crossing public properties. (It uses public properties in order to reach subscribers.) The physical realities of constructing CATV system – the use of public streets, rights of ways, the founding of structures, and the parceling of large regions – allow an LGU a certain degree of regulation over CATV operators.

x x x

But, while we recognize the LGUs’ power under the general welfare clause, we cannot sustain Resolution No. 210. We are convinced that respondents strayed from the well recognized limits of its power. The flaws in Resolution No. 210 are: (1) it violates the mandate of existing laws and (2) it violates the State’s deregulation policy over the CATV industry.

LGUs must recognize that technical matters concerning CATV operation are within the exclusive regulatory power of the NTC.

CASE DIGEST (Transportation Law): Cogeo-Cubao Operators and Drivers Association vs. C.A.

COGEO-CUBAO OPERATORS AND DRIVERS ASSOCIATION vs. THE COURT OF APPEALS, LUNGSOD SILANGAN TRANSPORT SERVICES, CORP., INC.
G.R. No. 100727 March 18, 1992

FACTS:
It appears that a certificate of public convenience to operate a jeepney service was ordered to be issued in favor of Lungsod Silangan to ply the Cogeo-Cubao route sometime in 1983 on the justification that public necessity and convenience will best be served, and in the absence of existing authorized operators on the lined apply for . . . On the other hand, defendant-Association was registered as a non-stock, non-profit organization with the Securities and Exchange Commission on October 30, 1985 . . . with the main purpose of representing plaintiff-appellee for whatever contract and/or agreement it will have regarding the ownership of units, and the like, of the members of the Association . . .

Perturbed by plaintiffs' Board Resolution No. 9 . . . adopting a Bandera' System under which a member of the cooperative is permitted to queue for passenger at the disputed pathway in exchange for the ticket worth twenty pesos, the proceeds of which shall be utilized for Christmas programs of the drivers and other benefits, and on the strength of defendants' registration as a collective body with the Securities and Exchange Commission, defendants-appellants, led by Romeo Oliva decided to form a human barricade on November 11, 1985 and assumed the dispatching of passenger jeepneys . . . This development as initiated by defendants-appellants gave rise to the suit for damages.

Defendant-Association's Answer contained vehement denials to the insinuation of take over and at the same time raised as a defense the circumstance that the organization was formed not to compete with plaintiff-cooperative. It, however, admitted that it is not authorized to transport passengers . . .

ISSUE :
Whether or not the petitioner usurped the property right of the respondent.

HELD:
Yes.

x x x

Under the Public Service Law, a certificate of public convenience is an authorization issued by the Public Service Commission for the operation of public services for which no franchise is required by law. In the instant case, a certificate of public convenience was issued to respondent corporation on January 24, 1983 to operate a public utility jeepney service on the Cogeo-Cubao route. x x x

A certification of public convenience is included in the term "property" in the broad sense of the term. Under the Public Service Law, a certificate of public convenience can be sold by the holder thereof because it has considerable material value and is considered as valuable asset (Raymundo v. Luneta Motor Co., et al., 58 Phil. 889). Although there is no doubt that it is private property, it is affected with a public interest and must be submitted to the control of the government for the common good (Pangasinan Transportation Co. v. PSC, 70 Phil 221). Hence, insofar as the interest of the State is involved, a certificate of public convenience does not confer upon the holder any proprietary right or interest or franchise in the route covered thereby and in the public highways (Lugue v. Villegas, L-22545, Nov . 28, 1969, 30 SCRA 409). However, with respect to other persons and other public utilities, a certificate of public convenience as property, which represents the right and authority to operate its facilities for public service, cannot be taken or interfered with without due process of law. Appropriate actions may be maintained in courts by the holder of the certificate against those who have not been authorized to operate in competition with the former and those who invade the rights which the former has pursuant to the authority granted by the Public Service Commission (A.L. Ammen Transportation Co. v. Golingco. 43 Phil. 280).

In the case at bar, the trial court found that petitioner association forcibly took over the operation of the jeepney service in the Cogeo-Cubao route without any authorization from the Public Service Commission and in violation of the right of respondent corporation to operate its services in the said route under its certificate of public convenience.

CASE DIGEST (Commercial Law): Santos vs. Sibug

ADOLFO L. SANTOS vs. ABRAHAM SIBUG and COURT OF APPEALS G.R. No. L-26815 May 26, 19810

FACTS:
Prior to April 26, 1963 (the ACCIDENT DATE), Vicente U. Vidad was a duly authorized passenger jeepney operator. Also prior to the ACCIDENT DATE, petitioner Adolfo L. Santos was the owner of a passenger jeep, but he had no certificate of public convenience for the operation of the vehicle as a public passenger jeep. SANTOS then transferred his jeep to the name of VIDAD so that it could be operated under the latter's certificate of public convenience. In other words, SANTOS became what is known in ordinary parlance as a kabit operator. For the protection of SANTOS, VIDAD executed a re-transfer document to the former, which was to be a private document presumably to be registered if and where it was decided that the passenger jeep of SANTOS was to be withdrawn from the kabit arrangement.

On the ACCIDENT DATE, private respondent Abraham Sibug was bumped by a passenger jeepney operated by VIDAD and driven by Severe Gragas. As a result thereof, SIBUG filed a complaint for damages against VIDAD and Gragas with the Court of First Instance of Manila, Branch XVII, and after trial sentenced VIDAD and Gragas, jointly and severally, to indemnify SIBUG.

On April 10, 1964, the Sheriff of Manila levied on a motor vehicle registered in the name of VIDAD.

SANTOS thereafter filed a third-party claim with the Sheriff alleging actual ownership of the motor vehicle levied upon, and stating that registration thereof in the name of VIDAD was merely to enable SANTOS to make use of VIDAD'S Certificate of Public Convenience.

ISSUE:
Whether petitioner Santos may prevent the levying of his vehicle.

HELD:
No.

x x x

In this case, SANTOS had fictitiously sold the jeepney to VIDAD, who had become the registered owner and operator of record at the time of the accident. It is true that VIDAD had executed a re-sale to SANTOS, but the document was not registered. Although SANTOS, as the kabit was the true owner as against VIDAD, the latter, as the registered owner/operator and grantee of the franchise, is directly and primarily responsible and liable for the damages caused to SIBUG, the injured party, as a consequence of the negligent or careless operation of the vehicle.] > This ruling is based on the principle that the operator of record is considered the operator of the vehicle in contemplation of law as regards the public and third persons even if the vehicle involved in the accident had been sold to another where such sale had not been approved by the then Public Service Commission. [ For the same basic reason, as the vehicle here in question was registered in VIDAD'S name, the levy on execution against said vehicle should be enforced so that the judgment in the BRANCH XVII CASE may be satisfied, notwithstanding the fact that the secret ownership of the vehicle belonged to another. SANTOS, as the kabit should not be allowed to defeat the levy on his vehicle and to avoid his responsibilities as a kabit owner for he had led the public to believe that the vehicle belonged to VIDAD. This is one way of curbing the pernicious kabit system that facilitates the commission of fraud against the travelling public.

CASE DIGEST (Transportation Law): Bohol Land Transportation Co. vs. Jureidini

BOHOL LAND TRANSPORTATION CO. vs.NAZARIO S. JUREIDINI G.R. No. 31244 September 23, 1929

FACTS:
This is a petition filed by the Bohol Land Transportation Co. praying for the review and reversal of an order issued by the Public Service Commission on November 23, 1928, admitting the application of respondent Nazario S. Jureidini, granting him a certificate of public necessity and convenience to operate regularly fourteen trucks in the Province of Bohol where the petitioner and appellant is a common carrier, and cancelling the authority given to the Bohol Land Transportation Co. in its certificate of public convenience and utility, to make special trips.

ISSUE:
Whether or not tha acts of the PSC are valid.

HELD:
No.

x x x

x x x [W]e are of opinion and so hold: (1) That before giving a certificate of public necessity and convenience to a transportation company or common land carrier, there being another in existence with the proper certificate, the latter must be given an opportunity to improve its service, should it be deficient or adequate; (2) that before a total or partial revocation of a certificate of public necessity and convenience, the party thereby affected must be notified and heared; (3) that the mere possession of a public mail contract is not a sufficient indication of the convenience and necessity of a new transportation line, and hence, will not sustain the issuance of a certificate of public necessity and convenience.

CASE DIGEST (Transportation Law): Commissioner of Customs vs. CA

COMMISSIONER OF CUSTOMS vs.THE COURT OF APPEALS
G.R. Nos. 111202-05 January 31, 2006

FACTS:
The whole controversy revolves around a vessel and its cargo. On January 7, 1989, the vessel M/V "Star Ace," coming from Singapore laden with cargo, entered the Port of San Fernando, La Union (SFLU) for needed repairs. The vessel and the cargo had an appraised value, at that time, of more or less Two Hundred Million Pesos (P200,000,000). When the Bureau of Customs later became suspicious that the vessel’s real purpose in docking was to smuggle its cargo into the country, seizure proceedings were instituted under S.I. Nos. 02-89 and 03-89 and, subsequently, two Warrants of Seizure and Detention were issued for the vessel and its cargo.

Respondent Cesar S. Urbino, Sr., does not own the vessel or any of its cargo but claimed a preferred maritime lien under a Salvage Agreement dated June 8, 1989. To protect his claim, Urbino initially filed two motions in the seizure and detention cases: a Motion to Dismiss and a Motion to Lift Warrant of Seizure and Detention. Apparently not content with his administrative remedies, Urbino sought relief with the regular courts by filing a case for Prohibition, Mandamus and Damages before the RTC of SFLU, seeking to restrain the District Collector of Customs from interfering with his salvage operation. The RTC of SFLU dismissed the case for lack of jurisdiction because of the pending seizure and detention cases. Urbino then elevated the matter to the CA. The Commissioner of Customs, in response, filed a Motion to Suspend Proceedings, advising the CA that it intends to question the jurisdiction of the CA before this Court. The motion was denied. Hence, in this petition the Commissioner of Customs assails the Resolution "F" recited above and seeks to prohibit the CA from continuing to hear the case.

ISSUE:
Whether Urbino's claim is a preferred lien in this case.

HELD:
No.

x x x

First of all, the Court finds the decision of the RTC of Manila, in so far as it relates to the vessel M/V "Star Ace," to be void as jurisdiction was never acquired over the vessel. In filing the case, Urbino had impleaded the vessel as a defendant to enforce his alleged maritime lien. This meant that he brought an action in rem under the Code of Commerce under which the vessel may be attached and sold. However, the basic operative fact for the institution and perfection of proceedings in rem is the actual or constructive possession of the res by the tribunal empowered by law to conduct the proceedings. This means that to acquire jurisdiction over the vessel, as a defendant, the trial court must have obtained either actual or constructive possession over it. Neither was accomplished by the RTC of Manila.

In his comment to the petition, Urbino plainly stated that "petitioner has actual[sic] physical custody not only of the goods and/or cargo but the subject vessel, M/V Star Ace, as well." This is clearly an admission that the RTC of Manila did not have jurisdiction over the res. While Urbino contends that the Commissioner of Custom’s custody was illegal, such fact, even if true, does not deprive the Commissioner of Customs of jurisdiction thereon. This is a question that ought to be resolved in the seizure and forfeiture cases, which are now pending with the CTA, and not by the regular courts as a collateral matter to enforce his lien. By simply filing a case in rem against the vessel, despite its being in the custody of customs officials, Urbino has circumvented the rule that regular trial courts are devoid of any competence to pass upon the validity or regularity of seizure and forfeiture proceedings conducted in the Bureau of Customs, on his mere assertion that the administrative proceedings were a nullity.

On the other hand, the Bureau of Customs had acquired jurisdiction over the res ahead and to the exclusion of the RTC of Manila. The forfeiture proceedings conducted by the Bureau of Customs are in the nature of proceedings in rem and jurisdiction was obtained from the moment the vessel entered the SFLU port. Moreover, there is no question that forfeiture proceedings were instituted and the vessel was seized even before the filing of the RTC of Manila case.

The Court is aware that Urbino seeks to enforce a maritime lien and, because of its nature, it is equivalent to an attachment from the time of its existence. Nevertheless, despite his lien’s constructive attachment, Urbino still cannot claim an advantage as his lien only came about after the warrant of seizure and detention was issued and implemented. The Salvage Agreement, upon which Urbino based his lien, was entered into on June 8, 1989. The warrants of seizure and detention, on the other hand, were issued on January 19 and 20, 1989. And to remove further doubts that the forfeiture case takes precedence over the RTC of Manila case, it should be noted that forfeiture retroacts to the date of the commission of the offense, in this case the day the vessel entered the country. A maritime lien, in contrast, relates back to the period when it first attached, in this case the earliest retroactive date can only be the date of the Salvage Agreement. Thus, when the vessel and its cargo are ordered forfeited, the effect will retroact to the moment the vessel entered Philippine waters.

Accordingly, the RTC of Manila decision never attained finality as to the defendant vessel, inasmuch as no jurisdiction was acquired over it, and the decision cannot be binding and the writ of execution issued in connection therewith is null and void.

CASE DIGEST (Transportation Law): Marikina Auto Line transport Corp. vs. People

MARIKINA AUTO LINE TRANSPORT CORPORATION and FREDDIE L. SUELTO vs. PEOPLE OF THE PHILIPPINES and ERLINDA V. VALDELLON
[G.R. No. 152040 March 31, 2006]

FACTS:
Erlinda V. Valdellon is the owner of a two-door commercial apartment located at No. 31 Kamias Road, Quezon City. The Marikina Auto Line Transport Corporation (MALTC) is the owner-operator of a passenger bus with Plate Number NCV-849. Suelto, its employee, was assigned as the regular driver of the bus.

At around 2:00 p.m. on October 3, 1992, Suelto was driving the aforementioned passenger bus along Kamias Road, Kamuning, Quezon City, going towards Epifanio de los Santos Avenue (EDSA). The bus suddenly swerved to the right and struck the terrace of the commercial apartment owned by Valdellon located along Kamuning Road. Valdellon demanded payment of P148,440.00 to cover the cost of the damage to the terrace. The bus company and Suelto offered a P30,000.00 settlement which Valdellon refused.

Valdellon filed a criminal complaint for reckless imprudence resulting in damage to property against Suelto. Valdellon also filed a separate civil complaint against Suelto and the bus company for damages. Suelto maintained that, in an emergency case, he was not, in law, negligent. Both the trial court and the CA ruled in against herein petitioners.

ISSUE:
Whether or not the sudden emergency rule applies in the case at bar.

HELD:
No.

x x x

It was the burden of petitioners herein to prove petitioner Suelto’s defense that he acted on an emergency, that is, he had to swerve the bus to the right to avoid colliding with a passenger jeep coming from EDSA that had overtaken another vehicle and intruded into the lane of the bus. The sudden emergency rule was enunciated by this Court in Gan v. Court of Appeals,23 thus:

[O]ne who suddenly finds himself in a place of danger, and is required to act without time to consider the best means that may be adopted to avoid the impending danger, is not guilty of negligence if he fails to adopt what subsequently and upon reflection may appear to have been a better method unless the emergency in which he finds himself is brought about by his own negligence.

Under Section 37 of Republic Act No. 4136, as amended, otherwise known as the Land Transportation and Traffic Code, motorists are mandated to drive and operate vehicles on the right side of the road or highway:

SEC. 37. Driving on right side of highway. – Unless a different course of action is required in the interest of the safety and the security of life, person or property, or because of unreasonable difficulty of operation in compliance herewith, every person operating a motor vehicle or an animal-drawn vehicle on a highway shall pass to the right when meeting persons or vehicles coming toward him, and to the left when overtaking persons or vehicles going the same direction, and when turning to the left in going from one highway to another, every vehicle shall be conducted to the right of the center of the intersection of the highway.

Section 35 of the law provides, thus:

Sec. 35. Restriction as to speed.—(a) Any person driving a motor vehicle on a highway shall drive the same at a careful and prudent speed, not greater nor less than is reasonable and proper, having due regard for the traffic, the width of the highway, and of any other condition then and there existing; and no person shall drive any motor vehicle upon a highway at such a speed as to endanger the life, limb and property of any person, nor at a speed greater than will permit him to bring the vehicle to a stop within the assured clear distance ahead.

In relation thereto, Article 2185 of the New Civil Code provides that "unless there is proof to the contrary, it is presumed that a person driving a motor vehicle has been negligent, if at the time of mishap, he was violating any traffic regulation." By his own admission, petitioner Suelto violated the Land Transportation and Traffic Code when he suddenly swerved the bus to the right, thereby causing damage to the property of private respondent.

However, the trial court correctly rejected petitioner Suelto’s defense, in light of his contradictory testimony vis-à-vis his Counter-Affidavit submitted during the preliminary investigation:

It is clear from the photographs submitted by the prosecution (Exhs. C, D, G, H & I) that the commercial apartment of Dr. Valdellon sustained heavy damage caused by the bus being driven by Suelto. "It seems highly improbable that the said damages were not caused by a strong impact. And, it is quite reasonable to conclude that, at the time of the impact, the bus was traveling at a high speed when Suelto tried to avoid the passenger jeepney." Such a conclusion finds support in the decision of the Supreme Court in People vs. Ison, 173 SCRA 118, where the Court stated that "physical evidence is of the highest order. It speaks more eloquently than a hundred witnesses." The pictures submitted do not lie, having been taken immediately after the incident. The damages could not have been caused except by a speeding bus. Had the accused not been speeding, he could have easily reduced his speed and come to a full stop when he noticed the jeep. Were he more prudent in driving, he could have avoided the incident or even if he could not avoid the incident, the damages would have been less severe.

In addition to this, the accused has made conflicting statements in his counter-affidavit and his testimony in court. In the former, he stated that the reason why he swerved to the right was because he wanted to avoid the passenger jeepney in front of him that made a sudden stop. But, in his testimony in court, he said that it was to avoid a passenger jeepney coming from EDSA that was overtaking by occupying his lane. Such glaring inconsistencies on material points render the testimony of the witness doubtful and shatter his credibility. Furthermore, the variance between testimony and prior statements renders the witness unreliable. Such inconsistency results in the loss in the credibility of the witness and his testimony as to his prudence and diligence.

As already maintained and concluded, the severe damages sustained could not have resulted had the accused acted as a reasonable and prudent man would. The accused was not diligent as he claims to be. What is more probable is that the accused had to swerve to the right and hit the commercial apartment of the plaintiff because he could not make a full stop as he was driving too fast in a usually crowded street.

Moreover, if the claim of petitioners were true, they should have filed a third-party complaint against the driver of the offending passenger jeepney and the owner/operator thereof.

Petitioner Suelto’s reliance on the sudden emergency rule to escape conviction for the crime charged and his civil liabilities based thereon is, thus, futile.

CASE DIGEST (Transportation Law): Philippine Charter Insurance Corp. vs. Unknown Owner

PHILIPPINE CHARTER INSURANCE CORPORATION vs. UNKNOWN OWNER OF THE VESSEL M/V “NATIONAL HONOR,” NATIONAL SHIPPING CORPORATION OF THE PHILIPPINES and INTERNATIONAL CONTAINER SERVICES, INC.
[G.R. No. 161833. July 8, 2005]

FACTS:
Petitioner Philippine Charter Insurance Corporation (PCIC) is the insurer of a shipment on board the vessel M/V “National Honor,” represented in the Philippines by its agent, National Shipping Corporation of the Philippines (NSCP).

The M/V “National Honor” arrived at the Manila International Container Terminal (MICT). The International Container Terminal Services, Incorporated (ICTSI) was furnished with a copy of the crate cargo list and bill of lading, and it knew the contents of the crate. The following day, the vessel started discharging its cargoes using its winch crane. The crane was operated by Olegario Balsa, a winchman from the ICTSI, exclusive arrastre operator of MICT.

Denasto Dauz, Jr., the checker-inspector of the NSCP, along with the crew and the surveyor of the ICTSI, conducted an inspection of the cargo. They inspected the hatches, checked the cargo and found it in apparent good condition. Claudio Cansino, the stevedore of the ICTSI, placed two sling cables on each end of Crate No. 1. No sling cable was fastened on the mid-portion of the crate. In Dauz’s experience, this was a normal procedure. As the crate was being hoisted from the vessel’s hatch, the mid-portion of the wooden flooring suddenly snapped in the air, about five feet high from the vessel’s twin deck, sending all its contents crashing down hard, resulting in extensive damage to the shipment.

PCIC paid the damage, and as subrogee, filed a case against M/V National Honor, NSCP and ICTSI. Both RTC and CA dismissed the complaint.

ISSUE:
Whether or not the presumption of negligence is applicable in the instant case.

HELD:
No.
We agree with the contention of the petitioner that common carriers, from the nature of their business and for reasons of public policy, are mandated to observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by them, according to all the circumstances of each case. he Court has defined extraordinary diligence in the vigilance over the goods as follows:

The extraordinary diligence in the vigilance over the goods tendered for shipment requires the common carrier to know and to follow the required precaution for avoiding damage to, or destruction of the goods entrusted to it for sale, carriage and delivery. It requires common carriers to render service with the greatest skill and foresight and “to use all reasonable means to ascertain the nature and characteristic of goods tendered for shipment, and to exercise due care in the handling and stowage, including such methods as their nature requires.”

The common carrier’s duty to observe the requisite diligence in the shipment of goods lasts from the time the articles are surrendered to or unconditionally placed in the possession of, and received by, the carrier for transportation until delivered to, or until the lapse of a reasonable time for their acceptance, by the person entitled to receive them.] >When the goods shipped are either lost or arrive in damaged condition, a presumption arises against the carrier of its failure to observe that diligence, and there need not be an express finding of negligence to hold it liable. To overcome the presumption of negligence in the case of loss, destruction or deterioration of the goods, the common carrier must prove that it exercised extraordinary diligence.

However, under Article 1734 of the New Civil Code, the presumption of negligence does not apply to any of the following causes:

1. Flood, storm, earthquake, lightning or other natural disaster or calamity;
2. Act of the public enemy in war, whether international or civil;
3. Act or omission of the shipper or owner of the goods;
4. The character of the goods or defects in the packing or in the containers;
5. Order or act of competent public authority.

It bears stressing that the enumeration in Article 1734 of the New Civil Code which exempts the common carrier for the loss or damage to the cargo is a closed list. To exculpate itself from liability for the loss/damage to the cargo under any of the causes, the common carrier is burdened to prove any of the aforecited causes claimed by it by a preponderance of evidence. If the carrier succeeds, the burden of evidence is shifted to the shipper to prove that the carrier is negligent.

“Defect” is the want or absence of something necessary for completeness or perfection; a lack or absence of something essential to completeness; a deficiency in something essential to the proper use for the purpose for which a thing is to be used. On the other hand, inferior means of poor quality, mediocre, or second rate. A thing may be of inferior quality but not necessarily defective. In other words, “defectiveness” is not synonymous with “inferiority.”

x x x

In the present case, the trial court declared that based on the record, the loss of the shipment was caused by the negligence of the petitioner as the shipper:

The same may be said with respect to defendant ICTSI. The breakage and collapse of Crate No. 1 and the total destruction of its contents were not imputable to any fault or negligence on the part of said defendant in handling the unloading of the cargoes from the carrying vessel, but was due solely to the inherent defect and weakness of the materials used in the fabrication of said crate.

The crate should have three solid and strong wooden batten placed side by side underneath or on the flooring of the crate to support the weight of its contents. x x x

CASE DIGEST (Transportation Law): Cargolift vs. Acuario

CARGOLIFT SHIPPING, INC. vs. L. ACUARIO MARKETING CORP. and SKYLAND BROKERAGE, INC
G.R. No. 146426. June 27, 2006

FACTS:
Respondent L. Acuario Marketing Corp., ("Acuario") and respondent Skyland Brokerage, Inc., ("Skyland") entered into a time charter agreement whereby Acuario leased to Skyland its L. Acuario II barge for use by the latter in transporting electrical posts from Manila to Limay, Bataan. At the same time, Skyland also entered into a separate contract with petitioner Cargolift, for the latter’s tugboats to tow the aforesaid barge.

After the whole operation was concluded, the barge was brought to Acuario’s shipyard where it was allegedly discovered by that the barge was listing due to a leak in its hull. It was informed by the skipper of the tugboat that the damage was sustained in Bataan. It was learned later the due to strong winds and large waves, the barge repeatedly hit its hull on the wall, thus prompting the barge patron to alert the tugboat captain of the M/T Count to tow the barge farther out to sea. However, the tugboat failed to pull the barge to a safer distance due to engine malfunction, thereby causing the barge to sustain a hole in its hull.

Acuario spent the total sum of P97,021.20 for the repairs, and, pursuant to the contract, sought reimbursement from Skyland, failing which, it filed a suit before the RTC which was granted. On appeal, it was affirmed by the CA. Skyland, in turn, filed a third-party complaint against petitioner alleging that it was responsible for the damage sustained by the barge.

ISSUE:
Whether or not petitioner should be held liable.

HELD:
Yes.
Thus, in the performance of its contractual obligation to Skyland, petitioner was required to observe the due diligence of a good father of the family. This much was held in the old but still relevant case of Baer Senior & Co.’s Successors v. La Compania Maritima where the Court explained that a tug and its owners must observe ordinary diligence in the performance of its obligation under a contract of towage. The negligence of the obligor in the performance of the obligation renders him liable for damages for the resulting loss suffered by the obligee. Fault or negligence of the obligor consists in his failure to exercise due care and prudence in the performance of the obligation as the nature of the obligation so demands.

In the case at bar, the exercise of ordinary prudence by petitioner means ensuring that its tugboat is free of mechanical problems. While adverse weather has always been a real threat to maritime commerce, the least that petitioner could have done was to ensure that the M/T Count or any of its other tugboats would be able to secure the barge at all times during the engagement. This is especially true when considered with the fact that Acuario’s barge was wholly dependent upon petitioner’s tugboat for propulsion. The barge was not equipped with any engine and needed a tugboat for maneuvering.

Needless to say, if petitioner only subjected the M/T Count to a more rigid check-up or inspection, the engine malfunction could have been discovered or avoided. The M/T Count was exclusively controlled by petitioner and the latter had the duty to see to it that the tugboat was in good running condition. There is simply no basis for petitioner’s assertion that Skyland contractually assumed the risk of any engine trouble that the tugboat may encounter. Skyland merely procured petitioner’s towing service but in no way assumed any such risk.

CASE DIGEST (Transportation Law): Poliand Industrial Ltd vs. National Development Co. (NDC)

POLIAND INDUSTRIAL LIMITED vs. NATIONAL DEVELOPMENT COMPANY, DEVELOPMENT BANK OF THE PHILIPPINES [G.R. No. 143866. August 22, 2005]

FACTS:
Poliand is an assignee of the of the rights of Asian Hardwood over the outstanding obligation of National Development Corporation (NDC), the latter being the owner of Galleon which previously secured credit accommodations from Asian Hardwood for its expenses on provisions, oil, repair, among others.

Galleon also obtained loans from Japanese lenders to finance acquisition of vessels which was guaranteed by DBP in consideration of a promise by Galleon to secure a first mortgage on the vessels. DBP later transferred ownership of the vessel to NDC.

A collection suit was filed after repeated demands of Poliand for the satisfaction of the obligation from Galleon, NDC and DBP went unheeded.

ISSUE: Whether POLIAND has a maritime lien enforceable against NDC or DBP or both.

HELD:
Yes, Poliand has a maritime lien which is more superior than DBP’s mortgage lien.

“Before POLIAND’s claim may be classified as superior to the mortgage constituted on the vessel, it must be shown to be one of the enumerated claims which Section 17, P.D. No. 1521 declares as having preferential status in the event of the sale of the vessel. One of such claims enumerated under Section 17, P.D. No. 1521 which is considered to be superior to the preferred mortgage lien is a maritime lien arising prior in time to the recording of the preferred mortgage. Such maritime lien is described under Section 21, P.D. No. 1521, which reads:

SECTION 21. Maritime Lien for Necessaries; persons entitled to such lien. — Any person furnishing repairs, supplies, towage, use of dry dock or marine railway, or other necessaries to any vessel, whether foreign or domestic, upon the order of the owner of such vessel, or of a person authorized by the owner, shall have a maritime lien on the vessel, which may be enforced by suit in rem, and it shall be necessary to allege or prove that credit was given to the vessel.

Under the aforequoted provision, the expense must be incurred upon the order of the owner of the vessel or its authorized person and prior to the recording of the ship mortgage. Under the law, it must be established that the credit was extended to the vessel itself.

The trial court found that GALLEON’s advances obtained from Asian Hardwood were used to cover for the payment of bunker oil/fuel, unused stores and oil, bonded stores, provisions, and repair and docking of the GALLEON vessels. These expenses clearly fall under Section 21, P.D. No. 1521.

The trial court also found that the advances from Asian Hardwood were spent for ship modification cost and the crew’s salary and wages. DBP contends that a ship modification cost is omitted under Section 17, P.D. No. 1521, hence, it does not have a status superior to DBP’s preferred mortgage lien.

As stated in Section 21, P.D. No. 1521, a maritime lien may consist in “other necessaries spent for the vessel.” The ship modification cost may properly be classified under this broad category because it was a necessary expenses for the vessel’s navigation. As long as an expense on the vessel is indispensable to the maintenance and navigation of the vessel, it may properly be treated as a maritime lien for necessaries under Section 21, P.D. No. 1521."

However, Only NDC is liable on the maritime lien

x x x [O]nly NDC is liable for the payment of the maritime lien. A maritime lien is akin to a mortgage lien in that in spite of the transfer of ownership, the lien is not extinguished. The maritime lien is inseparable from the vessel and until discharged, it follows the vessel. Hence, the enforcement of a maritime lien is in the nature and character of a proceeding quasi in rem.[65] The expression “action in rem” is, in its narrow application, used only with reference to certain proceedings in courts of admiralty wherein the property alone is treated as responsible for the claim or obligation upon which the proceedings are based.[66] Considering that DBP subsequently transferred ownership of the vessels to NDC, the Court holds the latter liable on the maritime lien. Notwithstanding the subsequent transfer of the vessels to NDC, the maritime lien subsists.

CASE DIGEST (Transportation Law): J.G. Summit Holdings vs. CA

JG SUMMIT HOLDINGS, INC., vs. COURT OF APPEALS, COMMITTEE ON PRIVATIZATION, ASSET PRIVATIZATION TRUST and PHILYARDS HOLDINGS G.R. No. 124293. November 20, 2000

FACTS:
National Investment and Development Corporation (NIDC) and Kawasaki Heavy Industries entered into a Joint Venture Agreement in a shipyard business named PHILSECO, with a shareholding of 60-40 respectively. NIDC’s interest was later transferred to the National Government.

Pursuant to President Aquino’s Proclamation No.5, which established the Committee on Privatization (COP) and Asset Privatization Trust (APT), and allowed for the disposition of the government’s non-performing assets, the latter allowed Kawasaki Heavy Industries to choose a company to which it has stockholdings, to top the winning bid of JG Summit Holdings over PHILSECO. JG Summit protested alleging that such act would effectively increase Kawasaki’s interest in PHILSECO—a shipyard is a public utility--and thus violative of the Constitution.

ISSUE:
Whether or not respondents’ act is valid.

HELD:
No.
A shipyard such as PHILSECO being a public utility as provided by law, the following provision of the Article XII of the Constitution applies:

“Sec. 11. No franchise, certificate, or any other form of authorization for the operation of a public utility shall be granted except to citizens of the Philippines or to corporations or associations organized under the laws of the Philippines at least sixty per centum of whose capital is owned by such citizens, nor shall such franchise, certificate, or authorization be exclusive in character or for a longer period than fifty years. Neither shall any such franchise or right be granted except under the condition that it shall be subject to amendment, alteration, or repeal by the Congress when the common good so requires. The State shall encourage equity participation in public utilities by the general public. The participation of foreign investors in the governing body of any public utility enterprise shall be limited to their proportionate share in its capital, and all the executive and managing officers of such corporation or association shall be citizens of the Philippines.”
x x x

Notably, paragraph 1.4 of the JVA accorded the parties the right of first refusal “under the same terms.” This phrase implies that when either party exercises the right of first refusal under paragraph 1.4, they can only do so to the extent allowed them by paragraphs 1.2 and 1.3 of the JVA or under the proportion of 60%-40% of the shares of stock. Thus, should the NIDC opt to sell its shares of stock to a third party, Kawasaki could only exercise its right of first refusal to the extent that its total shares of stock would not exceed 40% of the entire shares of stock of SNS or PHILSECO. The NIDC, on the other hand, may purchase even beyond 60% of the total shares. As a government corporation and necessarily a 100% Filipino-owned corporation, there is nothing to prevent its purchase of stocks even beyond 60% of the capitalization as the Constitution clearly limits only foreign capitalization.