Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-17725

February 28, 1962

REPUBLIC OF THE PHILIPPINES, plaintiff-appellee,

vs.
MAMBULAO LUMBER COMPANY, ET AL., defendants-appellants.
Office of the Solicitor General for plaintiff-appellee.
Arthur Tordesillas for defendants-appellants.
BARRERA, J.:
From the decision of the Court of First Instance of Manila (in Civil Case No. 34100) ordering it to pay
to plaintiff Republic of the Philippines the sum of P4,802.37 with 6% interest thereon from the date of
the filing of the complaint until fully paid, plus costs, defendant Mambulao Lumber Company
interposed the present appeal.1
The facts of the case are briefly stated in the decision of the trial court, to wit: .
The facts of this case are not contested and may be briefly summarized as follows: (a) under
the first cause of action, for forest charges covering the period from September 10, 1952 to
May 24, 1953, defendants admitted that they have a liability of P587.37, which liability is
covered by a bond executed by defendant General Insurance & Surety Corporation for
Mambulao Lumber Company, jointly and severally in character, on July 29, 1953, in favor of
herein plaintiff; (b) under the second cause of action, both defendants admitted a joint and
several liability in favor of plaintiff in the sum of P296.70, also covered by a bond dated
November 27, 1953; and (c) under the third cause of action, both defendants admitted a joint
and several liability in favor of plaintiff for P3,928.30, also covered by a bond dated July 20,
1954. These three liabilities aggregate to P4,802.37. If the liability of defendants in favor of
plaintiff in the amount already mentioned is admitted, then what is the defense interposed by
the defendants? The defense presented by the defendants is quite unusual in more ways
than one. It appears from Exh. 3 that from July 31, 1948 to December 29, 1956, defendant
Mambulao Lumber Company paid to the Republic of the Philippines P8,200.52 for
'reforestation charges' and for the period commencing from April 30, 1947 to June 24, 1948,
said defendant paid P927.08 to the Republic of the Philippines for 'reforestation charges'.
These reforestation were paid to the plaintiff in pursuance of Section 1 of Republic Act 115
which provides that there shall be collected, in addition to the regular forest charges provided
under Section 264 of Commonwealth Act 466 known as the National Internal Revenue Code,
the amount of P0.50 on each cubic meter of timber... cut out and removed from any public
forest for commercial purposes. The amount collected shall be expended by the director of
forestry, with the approval of the secretary of agriculture and commerce, for reforestation and
afforestation of watersheds, denuded areas ... and other public forest lands, which upon
investigation, are found needing reforestation or afforestation .... The total amount of the
reforestation charges paid by Mambulao Lumber Company is P9,127.50, and it is the

contention of the defendant Mambulao Lumber Company that since the Republic of the
Philippines has not made use of those reforestation charges collected from it for reforesting
the denuded area of the land covered by its license, the Republic of the Philippines should
refund said amount, or, if it cannot be refunded, at least it should be compensated with what
Mambulao Lumber Company owed the Republic of the Philippines for reforestation charges.
In line with this thought, defendant Mambulao Lumber Company wrote the director of
forestry, on February 21, 1957 letter Exh. 1, in paragraph 4 of which said defendant
requested "that our account with your bureau be credited with all the reforestation charges
that you have imposed on us from July 1, 1947 to June 14, 1956, amounting to around
P2,988.62 ...". This letter of defendant Mambulao Lumber Company was answered by the
director of forestry on March 12, 1957, marked Exh. 2, in which the director of forestry
quoted an opinion of the secretary of justice, to the effect that he has no discretion to extend
the time for paying the reforestation charges and also explained why not all denuded areas
are being reforested.
The only issue to be resolved in this appeal is whether the sum of P9,127.50 paid by defendantappellant company to plaintiff-appellee as reforestation charges from 1947 to 1956 may be set off or
applied to the payment of the sum of P4,802.37 as forest charges due and owing from appellant to
appellee. It is appellant's contention that said sum of P9,127.50, not having been used in the
reforestation of the area covered by its license, the same is refundable to it or may be applied in
compensation of said sum of P4,802.37 due from it as forest charges.
1wph1.t

We find appellant's claim devoid of any merit. Section 1 of Republic Act No. 115, provides:
SECTION 1. There shall be collected, in addition to the regular forest charges provided for
under Section two hundred and sixty-four of Commonwealth Act Numbered Four Hundred
Sixty-six, known as the National Internal Revenue Code, the amount of fifty centavos on
each cubic meter of timber for the first and second groups and forty centavos for the third
and fourth groups cut out and removed from any public forest for commercial purposes. The
amount collected shall be expended by the Director of Forestry, with the approval of the
Secretary of Agriculture and Natural Resources (commerce), for reforestation and
afforestation of watersheds, denuded areas and cogon and open lands within forest
reserves, communal forest, national parks, timber lands, sand dunes, and other public forest
lands, which upon investigation, are found needing reforestation or afforestation, or needing
to be under forest cover for the growing of economic trees for timber, tanning, oils, gums,
and other minor forest products or medicinal plants, or for watersheds protection, or for
prevention of erosion and floods and preparation of necessary plans and estimate of costs
and for reconnaisance survey of public forest lands and for such other expenses as may be
deemed necessary for the proper carrying out of the purposes of this Act.
All revenues collected by virtue of, and pursuant to, the provisions of the preceding
paragraph and from the sale of barks, medical plants and other products derived from
plantations as herein provided shall constitute a fund to be known as Reforestation Fund, to
be expended exclusively in carrying out the purposes provided for under this Act. All
provincial or city treasurers and their deputies shall act as agents of the Director of Forestry
for the collection of the revenues or incomes derived from the provisions of this Act.
(Emphasis supplied.)

Under this provision, it seems quite clear that the amount collected as reforestation charges from a
timber licenses or concessionaire shall constitute a fund to be known as the Reforestation Fund, and
that the same shall be expended by the Director of Forestry, with the approval of the Secretary of
Agriculture and Natural Resources for the reforestation or afforestation, among others, of denuded
areas which, upon investigation, are found to be needing reforestation or afforestation. Note that
there is nothing in the law which requires that the amount collected as reforestation charges should
be used exclusively for the reforestation of the area covered by the license of a licensee or
concessionaire, and that if not so used, the same should be refunded to him. Observe too, that the
licensee's area may or may not be reforested at all, depending on whether the investigation thereof
by the Director of Forestry shows that said area needs reforestation. The conclusion seems to be
that the amount paid by a licensee as reforestation charges is in the nature of a tax which forms a
part of the Reforestation Fund, payable by him irrespective of whether the area covered by his
license is reforested or not. Said fund, as the law expressly provides, shall be expended in carrying
out the purposes provided for thereunder, namely, the reforestation or afforestation, among others, of
denuded areas needing reforestation or afforestation.
Appellant maintains that the principle of a compensation in Article 1278 of the new Civil Code 2 is
applicable, such that the sum of P9,127.50 paid by it as reforestation charges may compensate its
indebtedness to appellee in the sum of P4,802.37 as forest charges. But in the view we take of this
case, appellant and appellee are not mutually creditors and debtors of each other. Consequently, the
law on compensation is inapplicable. On this point, the trial court correctly observed: .
Under Article 1278, NCC, compensation should take place when two persons in their own
right are creditors and debtors of each other. With respect to the forest charges which the
defendant Mambulao Lumber Company has paid to the government, they are in the coffers
of the government as taxes collected, and the government does not owe anything, crystal
clear that the Republic of the Philippines and the Mambulao Lumber Company are not
creditors and debtors of each other, because compensation refers to mutual debts. ..
And the weight of authority is to the effect that internal revenue taxes, such as the forest charges in
question, can be the subject of set-off or compensation.
A claim for taxes is not such a debt, demand, contract or judgment as is allowed to be set-off
under the statutes of set-off, which are construed uniformly, in the light of public policy, to
exclude the remedy in an action or any indebtedness of the state or municipality to one who
is liable to the state or municipality for taxes. Neither are they a proper subject of recoupment
since they do not arise out of the contract or transaction sued on. ... (80 C.J.S. 73-74. ) .
The general rule, based on grounds of public policy is well-settled that no set-off is
admissible against demands for taxes levied for general or local governmental purposes.
The reason on which the general rule is based, is that taxes are not in the nature of contracts
between the party and party but grow out of a duty to, and are the positive acts of the
government, to the making and enforcing of which, the personal consent of individual
taxpayers is not required. ... If the taxpayer can properly refuse to pay his tax when called
upon by the Collector, because he has a claim against the governmental body which is not
included in the tax levy, it is plain that some legitimate and necessary expenditure must be
curtailed. If the taxpayer's claim is disputed, the collection of the tax must await and abide
the result of a lawsuit, and meanwhile the financial affairs of the government will be thrown
into great confusion. (47 Am. Jur. 766-767.)

WHEREFORE, the judgment of the trial court appealed from is hereby affirmed in all respects, with
costs against the defendant-appellant. So ordered.
Bengzon, C.J., Padilla, Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L., Paredes, Dizon and
De Leon, JJ., concur.
Footnotes
Originally appealed to the Court of Appeals, but later certified to us by said court, on the
ground that it involves questions of law only.
1

"ART. 1278. Compensation shall take place when two persons, in their own right, are
creditors and debtors of each other."
2

REPUBLIC
vs.
MAMBULAO LUMBER G.R. No. L-17725, February 28, 1962

FACTS:
Defendant-appellant company paid P9,127.50 to plaintiff-appellee as reforestation
charges from 1947 to 1956. It seeks to set off or applied to the payment of the sum
of P4,802.37 as forest charges due and owing from appellant to appellee. It is
appellant's contention that said sum of P9,127.50, not having been used in the
reforestation of the area covered by its license, the same is refundable to it or may
be applied in compensation of said sum of P4,802.37 due from it as forest charges.
Appellant maintains that the principle of a compensation in Article 1278 of the new
Civil Code is applicable, such that the sum of P9,127.50 paid by it as reforestation
charges may compensate its indebtedness to appellee in the sum of P4,802.37 as
forest charges.
ISSUE: Whether or not set off or compensation is admissible against demand for
taxes levied.
But in the view we take of this case, appellant and appellee are not mutually
creditors and debtors of each other. Consequently, the law on compensation is
inapplicable. On this point, the trial court correctly observed: . Under Article 1278,
NCC, compensation should take place when two persons in their own right are
creditors and debtors of each other. With respect to the forest charges which the
defendant Mambulao Lumber Company has paid to the government, they are in the
coffers of the government as taxes collected, and the government does not owe
anything, crystal clear that the Republic of the Philippines and the Mambulao
Lumber Company are not creditors and debtors of each other, because

compensation refers to mutual debts. .. The general rule, based on grounds of

public policy is well-settled that no set-off is admissible against demands for taxes
levied for general or local governmental purposes. The reason on which the general
rule is based, is that taxes are not in the nature of contracts between the party and
party but grow out of a duty to, and are the positive acts of the government, to the
making and enforcing of which, the personal consent of individual taxpayers is not
required. ... If the taxpayer can properly refuse to pay his tax when called upon by
the Collector, because he has a claim against the governmental body which is not
included in the tax levy, it is plain that some legitimate and necessary expenditure
must be curtailed. If the taxpayer's claim is disputed, the collection of the tax must
await and abide the result of a lawsuit, and meanwhile the financial affairs of the
government will be thrown into great confusion. (47 Am. Jur. 766-767.)

FIRST DIVISION

[G.R. No. 144486. April 13, 2005]

RADIO
COMMUNICATIONS
OF
THE
PHILIPPINES,
INC.
(RCPI), petitioner, vs. PROVINCIAL ASSESOR OF SOUTH
COTABATO, PROVINCIAL TREASURER OF SOUTH COTABATO,
MUNICIPAL ASSESSOR OF TUPI, SOUTH COTABATO, and
MUNICIPAL
TREASURER
OF
TUPI,
SOUTH
COTABATO, respondents.
DECISION
CARPIO, J.:

The Case
This is a petition for review[1] to set aside the Decision[2] dated 29 March 2000 of the
Court of Appeals (appellate court) in CA-G.R. SP No. 47446. The appellate court
modified the ruling of the Central Board of Assessment Appeals (CBAA) and exempted
petitioner Radio Communications of the Philippines, Inc. (RCPI) from paying real
property tax assessed on its machinery and radio equipment mounted on its relay
station tower as accessories. However, the appellate court held RCPI liable for real
property tax on its radio station building, machinery shed, and relay station tower.
The Facts

In 1957, Republic Act No. 2036 (RA 2036) [3] granted RCPI a fifty-year franchise.
Section 14 of RA 2036, as amended by Republic Act No. 4054 (RA 4054) in 1964,
reads:

Sec. 14. In consideration of the franchise and rights hereby granted and any provision
of law to the contrary notwithstanding, the grantee shall pay the same taxes as are
now or may hereafter be required by law from other individuals, copartnerships,
private, public or quasi-public associations, corporations or joint stock companies, on
real estate, buildings and other personal property except radio equipment, machinery
and spare parts needed in connection with the business of the grantee, which shall be
exempt from customs duties, tariffs and other taxes, as well as those properties
declared exempt in this section. In consideration of the franchise, a tax equal to one
and one-half per centum of all gross receipts from the business transacted under this
franchise by the grantee shall be paid to the Treasurer of the Philippines each year,
within ten days after the audit and approval of the accounts as prescribed in this
Act. Said tax shall be in lieu of any and all taxes of any kind, nature or
description levied, established or collected by any authority whatsoever,
municipal, provincial or national, from which taxes the grantee is hereby
expressly exempted. (Emphasis supplied)
On 10 June 1985, the municipal treasurer of Tupi, South Cotabato assessed RCPI
real property taxes from 1981 to 1985. [4] The municipal treasurer demanded that RCPI
payP166,810 as real property tax on its radio station building in Barangay Kablon, as
well as on its machinery shed, radio relay station tower and its accessories, and
generating sets, based on the following tax declarations: [5]
1. Tax Declaration No. 7639

Radio station building

2. Tax Declaration No. 7640

Machinery shed

3. Tax Declaration No. 7641

Radio relay station tower and

accessories (100 feet high)

Two (2) units machinery [lister generating

set]

4. Tax Declaration No. 7642

RCPI protested the assessment before the Local Board of Assessment Appeals
(LBAA).[6] RCPI claimed that all its assessed properties are personal properties and thus
exempt from the real property tax. Assuming that the assessed properties are real
property, they are still exempt from real property taxes. Section 3 of Presidential Decree
No. 464 (PD 464) states that to be taxable, the machinery should be attached to the real
estate and essential for manufacturing, commercial, mining, industrial, or agricultural
purposes. RCPI claimed that the assessed properties are not used for manufacturing,
commercial, mining, industrial, or agricultural purposes. Besides, the assessed
properties are attached to a building on a lot not owned by RCPI.

RCPI also pointed out that its franchise exempts RCPI from paying any and all
taxes of any kind, nature or description in exchange for its payment of tax equal to one
and one-half per cent on all gross receipts from the business conducted under its
franchise. RCPI further claimed that any deviation from its franchise would violate the
non-impairment of contract clause of the Constitution. Finally, RCPI stated that the
value of the properties assessed has depreciated since their acquisition in the 1960s.
The Provincial Assessor of South Cotabato (provincial assessor) opposed RCPIs
claims on all points. The provincial assessor insisted that the assessed properties are
subject to the real property tax.
The Ruling of the Local Board of Assessment Appeals
In its Decision[7] dated 19 May 1995, the LBAA of Koronadal, South Cotabato
affirmed the notices of assessment as valid and consistent with the law. The properties
covered by Tax Declaration Nos. 7639, 7640, 7641 and 7642 are real properties for
purposes of real property taxation under PD 464. The in lieu of all taxes clause in RCPIs
franchise does not exempt its properties from the real property tax. Finally, despite its
protests, RCPI did not submit evidence as to the date of acquisition, acquisition cost,
and condition of the assessed properties to support its claim of depreciation. The LBAA,
in the absence of contrary evidence, relied on the validity of the Notice of Assessment
and on the presumption that official duty has been regularly performed. The dispositive
portion of the LBAAs decision reads:

WHEREFORE, the appellant is hereby ordered to pay the real property taxes,
inclusive of all penalties, surcharges and interest accruing as of the date of actual
payment, on the properties covered by Tax Declaration Nos. 7639, 7640, 7641, and
7642, as computed.
SO ORDERED.[8]
RCPI appealed to the CBAA.[9] RCPI maintained that the in lieu of all taxes clause in
its franchise forecloses the imposition of taxes other than the franchise tax. RCPI also
reiterated its arguments before the LBAA. Respondent assessors repeated their
opposition to RCPIs appeal.
The Ruling of the Central Board of Assessment Appeals
In its Decision[10] dated 7 November 1996, the CBAA dismissed RCPIs appeal. The
CBAA held that RCPIs liability for the franchise tax does not exempt RCPI from the real
property tax. Under RCPIs franchise, only personal properties such as radio equipment,
machinery and spare parts are exempt from customs duties, tariffs and other taxes. The
CBAA ruled that RCPI was liable for the real property tax on the assessed properties.
RCPI could also not invoke the non-impairment of contract clause since no legal right of
RCPI was violated. The dispositive portion of the CBAAs decision reads:

WHEREFORE, the Decision rendered by the Local Board of Assessment Appeals of

the Province of South Cotabato, dated 19 May 1995, is hereby AFFIRMED and the
instant appeal is hereby DISMISSED.
SO ORDERED.[11]
The Ruling of the Court of Appeals
RCPI filed its petition for review of the CBAA ruling before the appellate court. In its
Decision[12] dated 29 March 2000, the appellate court modified the CBAA ruling. The
appellate court ruled that Section 14 of RA 2036, as amended by RA 4054, clearly
exempts RCPI from tax on radio equipment, machinery, and spare parts needed in
connection with its business. Therefore, RCPI is not liable for real property tax on the
generating sets, and on its radio relay station tower and its accessories consisting of
two units of UHF communication equipment, power distribution unit boar, and battery
charger, which are actually varying types of radio equipment. The appellate court
explained thus:

The tower upon which these different types of radio equipment are mounted or
attached is, however, subject to real property tax since a tower is not strictly a radio
equipment as it only serves as a support for antennas or other communication
equipment mounted thereon for the transmission and reception of radio signals
(Colliers Encyclopedia, Vol. 22, p. 127). Nor could it be classified as machinery,
which is a combination of mechanical devices (26 Words and Phrases, p. 7), for
without attachments to it, a tower is merely a structure designed primarily with a view
to elevation (Websters New International Dictionary of the English Language, 2 nd Ed.,
Unabridged).
As RCPIs tax exemption covers only its radio equipment, machinery, and spare parts
essential to its business, it is liable for realty tax on its radio station building. The
machinery shed is likewise taxable as the same is a kind of real property falling within
the classification of buildings or permanent structures intended to shelter human
beings or domestic animals, or to receive, retain, or confine the goods in which a
person deals, or to house the tools or machinery he uses, or the persons he employs in
his business (5 Words and Phrases, p. 877).[13]
The dispositive portion of the appellate courts decision reads:

WHEREFORE, the decision of the Central Board of Assessment Appeals is hereby

MODIFIED. Petitioner is declared exempt from paying the real property taxes
assessed upon its machinery and radio equipment mounted as accessories to its relay
tower. The decision assessing taxes upon petitioners radio station building, machinery
shed, and relay station tower is, however, AFFIRMED. [14]

RCPI filed a partial motion for reconsideration, claiming that its exemption from real
property tax applies to the radio relay station tower, the radio station building, and the
machinery shed.[15] The appellate court denied the motion. [16]
The Issues
RCPI filed its petition for review before this Court. RCPI presented the following
issues for resolution:
1. The appellate court erred when it excluded RCPIs tower, relay station building and
machinery shed from tax exemption; and
2. The appellate court erred when it did not resolve the issue of nullity of the tax
declarations and assessments due to non-inclusion of depreciation allowance.[17]

The Ruling of the Court

Exemption from Real Property Tax
Respondents assert that RCPI not only changed its arguments, RCPI also made
incorrect arguments. RCPI earlier maintained that its radio relay station tower, radio
station building, and machinery shed are personal properties and are thus not subject to
the real property tax. RCPI now argues that its radio relay station tower, radio station
building, and machinery shed are tax-exempt because of the in lieu of all taxes clause in
its franchise, which exempts RCPI from the real estate tax.
RCPI contends that the in lieu of all taxes clause in its amended franchise exempts
it from paying all taxes other than franchise tax. It is thus no longer necessary to
determine whether the tower, relay station building, and machinery shed are radio
equipment for purposes of exemption from the real estate tax.
RCPI also states that legislative enactments during the pendency of this petition
caused it to lose and then regain its tax-exempt status. RCPI enumerated thus:

First, Congress passed the Local Government Code that withdrew all the tax
exemptions existing at the time of its passageincluding that of RCPIs.
Second, Congress enacted the franchise of telecommunications companies, such as
Islacom, Bell, Island Country, IslaTel, TeleTech, Major Telecoms, and Smart, with the
in lieu of all taxes proviso.
Third, Congress passed RA 7925 entitled An Act to Promote and Govern the
Development of Philippine Telecommunications and the Delivery of Public
Telecommunications Services which, through Section 23, mandated the equality of
treatment of service providers in the telecommunications industry.[18]
We are not persuaded.

As found by the appellate court, RCPIs radio relay station tower, radio station
building, and machinery shed are real properties and are thus subject to the real
property tax. Section 14 of RA 2036, as amended by RA 4054, states that [i]n
consideration of the franchise and rights hereby granted and any provision of law to the
contrary notwithstanding, the grantee shall pay the same taxes as are now or may
hereafter be required by law from other individuals, copartnerships, private, public or
quasi-public associations, corporations or joint stock companies, on real estate,
buildings and other personal property x x x. [19] The clear language of Section 14
states that RCPI shall pay the real estate tax.
The in lieu of all taxes clause in Section 14 of RA 2036, as amended by RA 4054,
cannot exempt RCPI from the real estate tax because the same Section 14 expressly
states thatRCPI shall pay the same taxes x x x on real estate, buildings x x x. The in
lieu of all taxes clause in the third sentence of Section 14 cannot negate the first
sentence of the same Section 14, which imposes the real estate tax on RCPI. The Court
must give effect to both provisions of the same Section 14. This means that the real
estate tax is an exception to the in lieu of all taxes clause.
Subsequent legislations have radically amended the in lieu of all taxes clause in
franchises of public utilities. As RCPI correctly observes, the Local Government Code of
1991 withdrew all the tax exemptions existing at the time of its passage including
that of RCPIs with respect to local taxes like the real property tax. Also, Republic Act
No. 7716 (RA 7716) abolished the franchise tax on telecommunications companies
effective 1 January 1996. To replace the franchise tax, RA 7716 imposed a 10 percent
value-added-tax on telecommunications companies under Section 102 [20] of the National
Internal Revenue Code. The present state of the law on the in lieu of all taxes clause in
franchises of telecommunications companies was summarized as follows:

The existing legislative policy is clearly against the revival of the in lieu of all taxes
clause in franchises of telecommunications companies. After the VAT on
telecommunications companies took effect on January 1, 1996, Congress never again
included the in lieu of all taxes clause in any telecommunications franchise it
subsequently approved. Also, from September 2000 to July 2001, all the fourteen
telecommunications franchises approved by Congress uniformly and expressly state
that the franchisee shall be subject to all taxes under the National Internal Revenue
Code, except the specific tax. The following is substantially the uniform tax provision
in these fourteen franchises:
Tax Provisions. The grantee, its successors or assigns, shall be subject to the payment
of all taxes, duties, fees, or charges and other impositions under the National Internal
Revenue Code of 1997, as amended, and other applicable laws: Provided, That
nothing herein shall be construed as repealing any specific tax exemptions, incentives
or privileges granted under any relevant law: Provided, further, That all rights,
privileges, benefits and exemptions accorded to existing and future
telecommunications entities shall likewise be extended to the grantee.

Thus, after the imposition of the VAT on telecommunications companies, Congress

refused to grant any tax exemption to telecommunications companies that sought new
franchises from Congress, except the exemption from specific tax. More importantly,
the uniform tax provision in these new franchises expressly states that the franchisee
shall pay not only all taxes, except specific tax, under the National Internal Revenue
Code, but also all taxes under other applicable laws. One of the other applicable
laws is the Local Government Code of 1991, which empowers local governments to
impose a franchise tax on telecommunications companies. This, to reiterate, is the
existing legislative policy.[21]
RCPI cannot also invoke the equality of treatment clause under Section 23 of Republic
Act No. 7925.[22] The franchises of Smart,[23] Islacom,[24] TeleTech,[25] Bell,[26] Major
Telecoms,[27] Island Country,[28] and IslaTel,[29] all expressly declare that the franchisee
shall pay the real estate tax, using words similar to Section 14 of RA 2036, as
amended. The provisions of these subsequent telecommunication franchises imposing
the real estate tax on franchisees only confirm that RCPI is subject to the real estate
tax. Otherwise, RCPI will stick out like a sore thumb, being the only telecommunications
company exempt from the real estate tax, in mockery of the spirit of equality of
treatment that RCPI is invoking, not to mention the violation of the constitutional rule on
uniformity of taxation.
It is an elementary rule in taxation that exemptions are strictly construed against the
taxpayer and liberally in favor of the taxing authority. It is the taxpayers duty to justify the
exemption by words too plain to be mistaken and too categorical to be misinterpreted. [30]
Exclusion of Depreciation Allowance
RCPI contends that the tax declarations and assessments covering its radio relay
station tower, radio station building, and machinery shed are void because the
assessors did not consider depreciation allowance in their assessments.
We have examined the records of this case and found that RCPI raised before the
LBAA and the CBAA the nullity of the assessments due to the non-inclusion of
depreciation allowance. Therefore, RCPI did not raise this issue for the first time.
However, even if we consider this issue, under the Real Property Tax Code depreciation
allowance applies only to machinery and not to real property.[31]
WHEREFORE, we DENY the petition. We AFFIRM the Decision of the Court of
Appeals in CA-G.R. SP No. 47446 dated 29 March 2000.
SO ORDERED.
Davide,
JJ., concur.

Jr.,

C.J.,

(Chairman),

Quisumbing,

Ynares-Santiago, and Azcuna,

RCPI v. Provincial Assesor of South Cotabato, et. al.

Chester Cabalza recommends his visitors to please read the original & full text of
the case cited. Xie xie!

G.R. No. 144486. April 13, 2005

RADIO COMMUNICATIONS OF THE PHILIPPINES, INC. (RCPI), Petitioner,

vs.
PROVINCIAL ASSESOR OF SOUTH COTABATO, PROVINCIAL TREASURER OF SOUTH
COTABATO, MUNICIPAL ASSESSOR OF TUPI, SOUTH COTABATO, and MUNICIPAL
TREASURER OF TUPI, SOUTH COTABATO, Respondents.

Facts:

R.A. No. 2036 of 1957, as amended by R.A. No. 4054, granted RCPI a 50-year
franchise. Thus, Sec. 14 of the amended law, in gist, provides that the grantee shall
pay the same taxes as may be required by law. Said tax shall be in lieu of any and
all taxes of any kind, nature or description levied, established or collected by any
authority whatsoever, municipal, provincial or national, from which taxes the
grantee is hereby expressly exempted.

On 10 June 1985, the municipal treasurer of Tupi, South Cotabato assessed RCPI real
property taxes from 1981 to 1985. The municipal treasurer demanded that RCPI pay
P166,810 as real property tax on its radio station building in Barangay Kablon, as

well as on its machinery shed, radio relay station tower and its accessories, and
generating sets, based on the following tax declarations.

RCPI protested the assessment before the Local Board of Assessment Appeals
(LBAA') and claimed that all its assessed properties are personal properties and thus
exempt from the real property tax. It also pointed out that its franchise exempts
RCPI from 'paying any and all taxes of any kind, nature or description in exchange
for its payment of tax equal to one and one-half per cent on all gross receipts from
the business conducted under its franchise. It further claimed that any deviation
from its franchise would violate the non-impairment of contract clause of the
Constitution. Finally, RCPI stated that the value of the properties assessed has
depreciated since their acquisition in the 1960s.

The Provincial Assessor of South Cotabato opposed RCPI's claims on all points.
The Local Board of Assessment Appeals ruled that appellant is ordered to pay the
real property taxes, inclusive of all penalties, surcharges and interest accruing as of
the date of actual payment, on the properties covered; in which the Central Board of
Assessment Appeals affirmed.

The Appelate Court ruled that decision of the Central Board of Assessment Appeals
is hereby MODIFIED. Petitioner is declared exempt from paying the real property
taxes assessed upon its machinery and radio equipment mounted as accessories to
its relay tower. The decision assessing taxes upon petitioner's radio station building,
machinery shed, and relay station tower is, however, affirmed.

Issues:

1. Whether the appellate court erred when it excluded RCPI's tower, relay station
building, and machinery shed from tax exemption; and

2. Whether the appellate court erred when it did not resolve the issue of nullity of
the tax declarations and assessments due to non-inclusion of depreciation
allowance.

Held:

Exemption from Real Property Tax

First, Congress passed the Local Government Code that withdrew all the tax
exemptions existing at the time of its passage including that of RCPI's. Second,
Congress enacted the franchise of telecommunications companies, such as Islacom,
Bell, Island Country, IslaTel, TeleTech, Major Telecoms, and Smart, with the 'in lieu of
all taxes' proviso. Third, Congress passed RA 7925 entitled 'An Act to Promote and
Govern the Development of Philippine Telecommunications and the Delivery of
Public Telecommunications Services' which, through Section 23, mandated the
equality of treatment of service providers in the telecommunications industry.

The existing legislative policy is clearly against the revival of the 'in lieu of all taxes'
clause in franchises of telecommunications companies. After the VAT on
telecommunications companies took effect on January 1, 1996, Congress never
again included the 'in lieu of all taxes' clause in any telecommunications franchise it
subsequently approved. RCPI cannot also invoke the equality of treatment clause
under Section 23 of Republic Act No. 7925. The franchises of the petitioners all
expressly declare that the franchisee shall pay the real estate tax, using words
similar to Section 14 of RA 2036, as amended.

It is an elementary rule in taxation that exemptions are strictly construed against

the taxpayer and liberally in favor of the taxing authority. It is the taxpayer's duty to
justify the exemption by words too plain to be mistaken and too categorical to be
misinterpreted.

Exclusion of Depreciation Allowance

RCPI contends that the tax declarations and assessments covering its radio relay
station tower, radio station building, and machinery shed are void because the
assessors did not consider depreciation allowance in their assessments. The Court
have examined the records of this case and found that RCPI raised before the LBAA
and the CBAA the nullity of the assessments due to the non-inclusion of
depreciation allowance. Therefore, RCPI did not raise this issue for the first time.
However, even if the court considers this issue, under the Real Property Tax Code
depreciation allowance applies only to machinery and not to real property.

The petition is denied and affirmed the decision of the Court of Appeals.

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. L-46881 September 15, 1988
PEOPLE OF THE PHILIPPINES, petitioner,
vs.
HON. MARIANO CASTAEDA JR., Judge of the Court of First Instance of Pampanga, Branch
III, VICENTE LEE TENG, PRISCILLA CASTILLO VDA. DE CURA and FRANCISCO
VALENCIA, respondents.
The Solicitor General for petitioner.
Martin N. Roque for respondents Priscilla Castillo Vda. de Cura and Francisco Valencia.
Antonio N. Santos for respondent Judge.

FELICIANO, J.:
In this Petition for certiorari and mandamus, the People seek the annulment of the Orders of
respondent Judge quashing criminal informations against the accused upon the grounds that: (a)
accused Francisco Valencia was entitled to tax amnesty under Presidential Decree No. 370; and (b)

that the dismissal of the criminal cases against accused Valencia inured to the benefit of his coaccused Vicente Lee Teng and Priscilla Castillo de Cura, and denying the People's Motion for
Reconsideration of said Orders.
Sometime in 1971, two (2) informants submitted sworn information under Republic Act No. 2338
(entitled "An Act to Provide for Reward to Informers of Violations of the Internal Revenue and
Customs Laws," effective June 19, 1959) to the Bureau of Internal Revenue ("BIR"), concerning
alleged violations of provisions of the Internal Revenue Code committed by the private respondents,
The record of this case includes an affidavit executed on 27 December 1971 by Mr. William Chan,
one of the said informers, describing the details of alleged violations of the tax code. 1 After
conducting an investigation, the BIR applied for and obtained search warrants from Executive Judge
Malcolm Sarmiento. Following investigation and examination by the BIR of the materials and documents
yielded by service of such search warrants, criminal informations were filed in court against the private
respondents.
In July 1973, State Prosecutor Estanislao L. Granados Department of Justice, filed with the Court of
First Instance of Pampanga an information docketed as Criminal Case No. 439 for violation of Sec.
170 (2) of the National Internal Revenue Code, as amended, against Francisco Valencia, Apolonio
G. Erespe y Comia and Priscilla Castillo de Cura, committed as follows:
That on or about the 19th day of January, 1972, in the premises of Valencia Distillery
located at del Pilar Street, San Fernando, Pampanga, Philippines, and within the
jurisdiction of the abovenamed Court, the accused FRANCISCO VALENCIA,
APOLONIO ERESPE Y COMIA and PRISCILLA QUIAZON OR "QUIAPO" alias
"MARY JO," conspiring and confederating with one another, did then and there
willfully, unlawfully, and feloniously have in their possession, custody and control,
false and counterfeit or fake internal revenue labels consisting of five (5) sheets
containing ten (10) labels each purporting to be regular labels of the Tanduay
Distillery, Inc. bearing Serial Nos. 2571891 to 2571901 to 2571910, 2571911 to
2571920, 05381 to 05390 and 05391 to 05400.
CONTRARY to the provisions of Section 170, paragraph 2 of the National Internal
Revenue Code, as amended. 2
On the same date, another criminal information docketed as Criminal Case No. 440 was filed by the
same State Prosecutor in the same court for violation of Section 174 (3) of the National Internal
Revenue Code, as amended against the same persons, charging them as follows:
That on or about the 19th day of January 1972 in the premises of Valencia Distillery
located at del Pilar Street, San Fernando, Pampanga, Philippines and within the
jurisdiction of this Honorable Court, the accused FRANCISCO VALENCIA,
APOLONIO G. ERESPE y COMIA and PRISCILLA QUIAZON or QUIANO alias
MARY JO, conspiring and confederating together, did then and there wilfully,
unlawfully and feloniously, have in their possession, custody and control, locally
manufactured articles subject to specific tax, the tax on which has not been paid in
accordance with law, THIRTY THREE (33) boxes of 24 bottles each of alleged Anejo
Rum, 375 cc., NINE (9) BOXES of alleged Tanduay Rum of TWELVE (12) BOTTLES
each, 750 cc., TWENTY (20) BOXES of alleged Ginebra San Miguel Gin of TWENTY
FOUR (24) BOTTLES each, 375 cc., THREE (3) BOXES OF TWENTY FOUR (24)

BOTTLES each, 375 cc., of Ginebra San Miguel Gin, ONE (1) GALLON bottle of
wine improver, NINE lbs. net with actual contents of 1/5 of the bottle, ONE (1)
SMALL BOTTLE, 1 Ib, net, of Rum Jamaica, half-full, ONE (1) BOTTLE, 1 Ib. net of
the wine improvers (full), TWELVE (12) BOTTLES of alleged Tanduay Rum, 750 cc.,
pale, FOUR (4) BOTTLES of Ginebra San Miguel (alleged) 350 cc. and TWO (2)
BOTTLES of Tanduay Rum, 375 cc. the total specific tax due on which is P160.01.
CONTRARY to Section 174 of the National Internal Revenue Code, as amended.

As a result of further investigation of the sworn complaints filed by the informers with the BIR, on 14
March 1974, six (6) more criminal informations docketed as Criminal Cases Nos., 538-543 were filed
in the Pampanga Court of First Instance against Vicente Lee Teng alias "Vicente Lee," alias "Lee
Teng," and Francisco Valencia. These informations charged the two (2) with violations of Section
178, in relation to Sections 182 (A) (1) (3c) and 208 of the National Internal Revenue Code, as
amended based on their failure to pay annual privilege taxes for each of the six (6) years from 1966
to 1972. The six (6) informations uniformly charged the accused as follows:
The undersigned State Prosecutor accuses VICENTE LEE TENG alias VICENTE
LEE alias LEE TENG, and FRANCISCO VALENCIA of the crime of Violation of Sec.
178 in relation with Sec. 182 (A) (1) 3c and Sec. 208 of the National Internal
Revenue Code as amended, committed as follows:
That on or about the 19th of January 1972, [also during the years 1967, 1968, 1969,
1970 and 1971] in the premises of Valencia Distillery located at del Pilar Street, San
Fernando, Pampanga, Philippines and within the jurisdiction of this Honorable Court,
the above-named accused, conspiring and confederating together and mutually
helping one another, did then and there willfully, unlawfully and feloniously distill,
rectify, repair compound or manufacture alcoholic products subject to specific tax
without having paid the privilege tax therefor. CONTRARY TO LAW. 4
On 22 April 1974, after arraignment, accused Valencia filed a Motion to Quash Criminal Cases Nos.
538-543 inclusive, upon the grounds that the six (6) informations had been filed without conducting
the necessary preliminary investigation and that he was entitled to the benefits of the tax amnesty
provided by P.D. No. 370. The State Prosecutor opposed the Motion to Quash arguing that the
necessary preliminary investigation in the six (6) criminal cases had in fact been conducted and that
in any case, failure to hold the preliminary investigation was not a ground for a motion to quash. The
State Prosecutor further argued that the accused Valencia was not entitled to avail himself of the
benefits of P.D. No. 370 since his tax cases were the subject of valid information submitted under
R.A. No. 2338 as of 31 December 1973.
The respondent Judge granted the Motion to Quash and issued an Order, dated 15 July 1974,
dismissing not only Criminal Cases Nos. 538-543 but also Criminal Cases Nos. 439 and 440 insofar
as accused Francisco Valencia was concerned. A Motion for Reconsideration by the People was
similarly denied by respondent Judge.
On 14 December 1975, the remaining accused Vicente Lee Teng and Priscilla Castillo de Cura,
having been arraigned, filed Motions to Quash Criminal Cases Nos. 538-543 and 439 and 440, upon
the common ground that the dismissal of said cases insofar as accused Francisco Valencia was
concerned, inured to their benefit. The People opposed the Motions to Quash upon the ground that

the accused were not entitled to the benefits of the tax amnesty under P.D. No. 370 and that,
assuming the dismissal of said criminal cases was valid insofar as accused Valencia was concerned,
the resulting immunity from criminal prosecution was personal to accused Valencia.
The respondent Judge granted the Motions to Quash by Vicente Lee Teng and Priscilla Castillo de
Cura, and denied the People's Motion for Reconsideration.
There are two (2) preliminary issues which need to be addressed before dealing with the questions
of substantive law posed by this case. The first preliminary issue-whether or not the People of the
Philippines are guilty of laches-was raised by private respondents in their Answer. 5 The respondent
Judge denied the People's Motion for Reconsideration of his Order granting Francisco Valencia's Motion
to Quash the eight (8) criminal cases, on 18 November 1974. Vicente Lee Teng and Priscilla Castillo de
Cura filed their respective Motions to Quash on 14 December 1975; respondent Judge granted their
Motions to Quash on 31 March 1976. The People filed a Motion for Reconsideration which was denied on
17 February 1977. Approximately seven (7) months later, on 12 September 1977, the present Petition
forcertiorari and mandamus was filed by the People. Initially, the Court resolved to dismiss this Petition in
a Resolution dated 5 July 1978. The People, however, filed a Motion for Reconsideration of that Order
and the Court, in its Resolution of 1 October 1979, set aside its Resolution of dismissal and considered
this case as submitted for decision.
Ordinarily, perhaps, a Petition for certiorari brought seven (7) months after rendition of the last order
sought to be set aside might be regarded as barred by laches. In the case at bar, however, the Court
believes that the equitable principle of laches should not be applied to bar this Petition
for certiorari and Mandamus. The effect of such application would not be the avoidance of an
inequitable situation (the very raison d'etre of the laches principle), but rather the perpetuation of the
state of facts brought about by the orders of the respondent Judge, a state of facts which, as will be
seen later, is marked by a gross disregard of the legal rights of the People. The Court, in other
words, is compelled to take into account both the importance of the substantive issues raised in this
case and the nature of the result brought about by the respondent Judge's orders. Moreover, on a
more practical level, the dismissal of the cases was resisted vigorously by the prosecution which
filed both oppositions to the Motion to Dismiss and Motions for Reconsideration of the Orders
granting the Motions to Quash. The private respondents, in other words, were under no illusion as to
the position taken and urged by the People in this Case. We hold that, in the circumstances of this
case, the Petition for certiorari and mandamus is not barred by laches.
The second preliminary issue was also raised by private respondents in their Answer, that is,
whether or not the defense of double jeopardy became available to them with the dismissal by
respondent Judge of the eight (8) criminal cases. This defense need not detain us for long for it is
clearly premature in the present certiorari proceeding. In the certiorari petition at bar, the validity and
legal effect of the orders of dismissal issued by the respondent Judge of the eight (8) criminal cases
are precisely in issue. Should the Court uphold these dismissal orders as valid and effective and
should a second prosecution be brought against the accused respondents, that second prosecution
may be defended against with the plea of double jeopardy. If, upon the other hand, the Court finds
the dismissal orders to be invalid and of no legal effect, the legal consequence would follow that the
first jeopardy commenced by the eight (8) informations against the accused has not yet been
terminated and accordingly a plea of second jeopardy must be rejected both here and in the
continuation of the criminal proceedings against the respondents-accused.
We turn, therefore, to the first substantive issue that needs to be resolved: whether or not the
accused Valencia, Lee Teng and de Cura are entitled to the benefits available under P.D. No. 370.

The scope of application of the tax amnesty declared by P.D. No. 370 is marked out in the following
broad terms:
1. A tax amnesty is hereby granted to any person, natural or juridical, who for any
reason whatsoever failed to avail of Presidential Decree No. 23 and Presidential
Decree No. 157; or, in so availing of the said Presidential Decrees failed to include all
that were required to be declared therein if he now voluntarily discloses under this
decree all his previously untaxed income and/or wealth such as earnings, receipts,
gifts, bequests or any other acquisitions from any source whatsoever which are or
were previously taxable under the National Internal Revenue Code, realized here or
abroad by condoning all internal revenue taxes including the increments or penalties
on account of non-payment as well as all civil, criminal or administrative liabilities,
under the National Internal Revenue Code, the Revised Penal Code, the Anti-Graft
and Corrupt Practices Act, the Revised Administrative Code, the Civil Service Laws
and Regulations, laws and regulations on Immigration and Deportation, or any other
applicable law or proclamation, as it is hereby condoned, provided a tax of fifteen
(15%) per centum on such previously untaxed income and/or wealth is imposed
subject to the following conditions:
a. Such previously untaxed income and/or wealth must have been earned or realized
prior to 1973, except the following:
b. Capital gains transactions where the taxpayer has availed of Presidential Decree
No. 16, as amended, but has not complied with the conditions thereof;
c. Tax liabilities with or without assessments, on withholding tax at source provided
under Sections 53 and 54 of the National Internal Revenue Code, as amended;
d. Tax liabilities with assessment notices issued as of December 31, 1 973;
e. Tax cases which are the subject of a valid information under Republic Act No.
2338 as of December 31, 1973; and
f. Property transferred by reason of death or by donation during the year 1972.
xxx xxx xxx
The first point that should be made in respect of P.D. No. 370 is that compliance with all the
requirements of availment of tax amnesty under P.D. No. 370 would have the effect of condoning not
just income tax liabilities but also "all internal revenue taxes including the increments or penalties on
account of non-payment as well as all civil, criminal or administrative liabilities, under the Internal
Revenue Code, the Revised Penal Code, the Anti-Graft and Corrupt Practices Act, the Revised
Administrative Code, the Civil Service Laws and Regulations, laws and regulations on Immigration
and Deportation, or any other applicable law or proclamation." Thus, entitlement to benefits of P.D.
No. 370 would have the effect of condoning or extinguishing the liabilities consequent upon
possession of false and counterfeit internal revenue labels; the manufacture of alcoholic products
subject to specific tax without having paid the annual privilege tax therefor, and the possession,
custody and control of locally manufactured articles subject to specific tax on which the taxes had

not been paid in accordance with law, in other words, the criminal liabilities sought to be imposed
upon the accused respondents by the several informations quoted above.
It should be underscored, secondly, that to be entitled to the extinction of liability provided by P.D.
No. 370, the claimant must have voluntarily disclosed his previously untaxed income or wealth and
paid the required fifteen percent (15%) tax on such previously untaxed income or wealth imposed by
P.D. No.370. 6 Where the disclosure of such previously untaxed income or wealth was not voluntary but
rather the accompaniment or result of tax cases or tax assessments already pending as of 31 December
1973, the claimant is not entitled to the benefits of P.D. No. 370. Section 1 (a) (4) of P.D. No. 370,
expressly excluded from the coverage of P.D. No. 370: "tax cases which are the subject of a valid
information under R.A. No. 2338 as of December 31, 1973." 7 In the instant case, the violations of the
National Internal Revenue Code with which the respondent accused were charged, had already been
discovered by the BIR when P.D. No. 370 took effect on 9 January 1974, by reason of the sworn
information or affidavit-complaints filed by informers with the BIR under Republic Act No. 2338 prior to 31
December 1973.
It is necessary to note that the "valid information under Republic Act No. 2338" referred to in Section
1 (a) (4) of P.D. No. 370, refers not to a criminal information filed in court by a fiscal or special
prosecutor, but rather to the sworn information or complaint filed by an informer with the BIR under
R.A. No. 2338 in the hope of earning an informer's reward. The sworn information or complaint filed
with the BIR under R.A. No. 2338 may be considered "valid" where the following conditions are
complied with:
(1) that the information was submitted by a person other than an internal revenue or
customs official or employee or other public official, or a relative of such official or
employee within the sixth degree of consanguinity;
(2) that the information must be definite and sworn to and must state the facts
constituting the grounds for such information; and
(3) that such information was not yet in the possession of the BIR or the Bureau of
Customs and does not refer to "a case already pending or previously investigated or
examined by the Commissioner of Internal Revenue or the Commissioner of
Customs, or any of their deputies, agents or examiners, as the case may be, or the
Secretary of Finance or any of his deputies or agents. 8
In the instant case, not one but two (2) "informations' or affidavit-complaints concerning private
respondents' operations said to be in violation of certain provisions of the National Internal Revenue
Code, had been filed with the BIR as of 31 December 1973. In fact, those two (2) affidavit-complaints
had matured into two (2) criminal informations in court -Criminal Cases Nos. 439 and 440 against
the respondent accused, by 31 December 1973. The six (6) informations docketed as Criminal
Cases Nos. 538-543, while filed in court only on 14 March 1974, had been based upon the sworn
information previously submitted as of 31 December 1973 to the BIR.
It follows that, even assuming respondent accused Francisco Valencia was otherwise entitled to the
benefits of P.D. No. 370, none of the informations filed against him could have been condoned under
the express provisions of the tax amnesty statute.

Accused Valencia argued that the People were estopped from questioning his entitlement to the
benefits of the tax amnesty, considering that agents of the BIR had already accepted his application
for tax amnesty and his payment of the required fifteen percent (15%) special tax.
This contention does not persuade. At the time he paid the special fifteen percent (15%) tax under
P.D. No. 370, accused Francisco Valencia had in fact already been subjected by the BIR to
extensive investigation such that the criminal charges against him could not be condoned under the
provisions of the amnesty statute. Further, acceptance by the BIR agents of accused Valencia's
application for tax amnesty and payment of the fifteen percent (15%) special tax was no more than a
ministerial duty on the part of such agents. Accused Valencia does not pretend that the BIR had
actually ruled that he was entitled to the benefits of the tax amnesty statute. In any case, even
assuming, though only arguendo, that the BIR had so ruled, there is the long familiar rule that
"erroneous application and enforcement of the law by public officers do not block, subsequent
correct application of the statute and that the government is never estopped by mistake or error on
the part of its agent." 9 which finds application in the case at bar. Still further, a tax amnesty, much like to
a tax exemption, is never favored nor presumed in law and if granted by statute, the terms of the amnesty
like that of a tax exemption must be construed strictly against the taxpayer and liberally in favor of the
taxing authority. 10 Valencia's payment of the special fifteen percent (15%) tax must be regarded as legally
ineffective.
We turn to the second substantive issue which is whether or not the dismissal by the respondent
court of the criminal informations against accused Valencia, inured to the benefit of Valencia's coaccused. Because of the conclusion reached above, that is, that accused Francisco Valencia
was not legally entitled to the benefits of P.D. No. 370 and that the dismissal of the criminal
information as against him was serious error on the part of the respondent Judge, it may not be
strictly necessary to deal with this second issue. There was in fact nothing that could have inured to
the benefit of Valencia's co-accused. It seems appropriate to stress, nonetheless, that co-accused
and co-respondents Lee Teng and Priscilla Castillo de Cura, in order to enjoy the benefits of the tax
amnesty statute here involved, must show that they have individually complied with and come within
the terms of that statute. 11 The fact that conspiracy had been alleged in each of the criminal informations
here involved certainly could not result in an automatic exemption of Lee Teng and Priscilla Castillo de
Cura from compliance with the requirements of the tax amnesty statute. In the second place, assuming,
for present purposes only, that accused Francisco Valencia was (and he was not) legally entitled to the
benefits of P.D. No. 370 the defense of amnesty which (hypothetically) became available to Valencia was
personal to him. Once more, the allegation of conspiracy made in the several criminal informations here
involved, did not have the effect of making a defense available to one co-conspirator automatically
available to the other co-conspirators. The defense of the tax amnesty under P.D. No. 370 is, like insanity,
a personal defense; for that defense relates to the circumstances of a particular accused and not to the
character of the acts charged in the criminal information. The statute makes the defense of
extinguishment of liability available only under very specific circumstances and on the basis of reciprocity,
as it were: the claimant must disclose his previously untaxed income or wealth (which then may be
effectively subjected to future taxation) and surrender to the Government fifteen percent (15%) of such
income or wealth; then, and only then, would the claimant's liability be extinguished. Lee Teng and Pricilla
Castillo de Cura never pretended that they had complied with the requirements of PD No. 370, including
that of reciprocity.
We conclude that the respondent Judge's error in respect of the first and second substantive issues
considered above is so gross and palpable as to amount to arbitrary and capricious action and to
grave abuse of discretion. Those orders effectively prevented the People from prosecuting and

presenting evidence against the accused-respondents; they denied the People its day in court. It is
well-settled that:
[a] purely capricious dismissal of an information as herein involved, moreover,
deprives the State of fair opportunity to prosecute and convict. It denies the
prosecution its day in court. Accordingly, it is a dismissal without due process and,
therefore, null and void. A dismissal invalid for lack of a fundamental requisite, such
as due process, will not constitute a proper basis for the claim of double jeopardy. 12
WHEREFORE, the Orders of respondent Judge dated 15 July 1974, 18 November 1974, 31 March 1976 and 17
February 1977 are hereby SET ASIDE. Respondent Judge no longer being with the Judiciary, the branch of the Regional Trial Court of
Pampanga seized of Criminal Cases Nos. 439 and 440, and 538-543 inclusive, against the surviving respondent accused, 13 is hereby
ORDERED to proceed with the trial of these criminal cases. Costs against private respondents.

SO ORDERED.
Fernan, C.J., Gutierrez, Jr., Bidin and Cortes, JJ., concur.