G.R. No.
191667, April 17, 2013 not to be a privy to the loans, as long as taxes are involved, people
Land Bank of the Philippines
vs Eduardo M. Cacayuran
Ponente: Perlas-Bernabe
Facts:
This is a petition for Review on Certiorari of the CA affirming the
RTC in declaring the nullity of the loan agreements entered into
by Land Bank and the Municipality of Agoo, La Union.
Agoo SB passed a certain resolution to implement a
redevelopment plan to redevelop the Agoo Public Plaza. To
finance the plan, SB passed a resolution authorizing then Maor
Eriguel to obtain a loan from Land Bank, incidental to it,
mortgaged a portion of the plaza as collateral. It has also
authorized the assignment of a portion if the IRA and monthly
income in favor of Land Bank to secure the payment. 10 Kiosks
were made at the plaza, then were rented out. Later, a
commercial center on the Plaza lot was built too, with a loan from
Land Bank, posting the same securities as the first loan.
The commercial loan was opposed by some residents of the
municipality embodied in a manifesto launched through a
signature campaign by the residents and Cacayuran. Invoking his
right as taxpayer, Cacayuran filed a complaint against the officials
and Land bank assailing the validity of the loans on the ground
that the Plaza lot used as collateral is property of public dominion
and therefore beyond the commerce of man.
RTC Ruling: declared the nullity of the subject loans, saying that
the oans were passed in a highly irregular manner, as such, the
Municipality is not bound by the same.
Aggrieved, Land Bank filed notice of appeal.
Ruling of CA: affirmed with modification the RTC's ruling,
excluding the Vice Mayor from any personal liability arising from
the subject loans. Cacayuran has locus standi as resident and
taxpayer in the municipality and the issue involves public
interest. The plaza cannot be a valid collateral to a loans for it is
of public dominion.
Land Bank filed this instant petition.
Issues:
(1) whether Cacayuran has locus standi (2) whether the subject
resolutions were validly passed and (3) whether the subject loans
are ultra vires. [The doctrine in the law of corporations that holds
that if a corporation enters into a contract that is beyond the
scope of its corporate powers, the contract is illegal.]
SC Ruling:
(1) Taxpayer is allowed to sue if: (1) public funds derived from
taxation are disbursed by a political subdivision or
instrumentality and in doing so, a law is violated or some
irregularity is committed; and (2) the petitioner is directly
affected by the alleged act.
In the case, the proceeds from the Subject Loans had already been
converted into public funds by the Municipality’s receipt thereof.
Funds coming from private sources become impressed with the
characteristics of public funds when they are under official
custody. Public plaza belongs to public dominion, Cacayuran need
have a right to question the contracts entered into by the
government.
(2) While ordinances are laws and possess a general and
permanent character, resolutions are merely declarations of the
sentiment or opinion of a law making body on a specific matter
and are temporary in nature. As opposed to ordinances, "no
rights can be conferred by and be inferred from a resolution." In
this accord, it cannot be denied that the SB violated Section
444(b)(1)(vi) of the LGC altogether. Noticeably, the passage of
the Subject Resolutions was also tainted with other irregularities,
such as (1) the SB’s failure to submit the Subject Resolutions to
the Sangguniang Panlalawigan of La Union for its review contrary
to Section 56 of the LGC; and (2) the lack of publication and
posting in contravention of Section 59 of the LGC.
(3) Generally, an ultra vires act is one committed outside the
object for which a corporation is created as defined by the law of
its organization and therefore beyond the powers conferred upon
it by law.43 There are two (2) types of ultra vires acts. There is a
distinction between an act utterly beyond the jurisdiction of a
municipal corporation and the irregular exercise of a basic power
under the legislative grant in matters not in themselves
jurisdictional. The former are ultra vires in the primary sense and
void; the latter, ultra vires only in a secondary sense which does
not preclude ratification or the application of the doctrine of
estoppel in the interest of equity and essential justice.
Applying these principles to the case at bar, it is clear that the
Subject Loans belong to the first class of ultra vires acts deemed
as void. Records disclose that the said loans were executed by the
Municipality for the purpose of funding the conversion of the
Agoo Plaza into a commercial center pursuant to the
Redevelopment Plan. However, the conversion of the said plaza is
beyond the Municipality’s jurisdiction considering the property’s
nature as one for public use and thereby, forming part of the
public dominion. Accordingly, it cannot be the object of
appropriation either by the State or by private persons. Nor can it
be the subject of lease or any other contractual undertaking.
Commissioner of Internal Revenue vs. Algue Inc.
GR No. L-28896 | Feb. 17, 1988
Facts:
· Algue Inc. is a domestic corp engaged in engineering,
construction and other allied activities
· On Jan. 14, 1965, the corp received a letter from the CIR
regarding its delinquency income taxes from 1958-1959, amtg to
P83,183.85
· A letter of protest or reconsideration was filed by Algue Inc on
Jan 18
· On March 12, a warrant of distraint and levy was presented to
Algue Inc. thru its counsel, Atty. Guevara, who refused to receive
it on the ground of the pending protest
· Since the protest was not found on the records, a file copy from
the corp was produced and given to BIR Agent Reyes, who
deferred service of the warrant
· On April 7, Atty. Guevara was informed that the BIR was not
taking any action on the protest and it was only then that he
accepted the warrant of distraint and levy earlier sought to be
served
· On April 23, Algue filed a petition for review of the decision of
the CIR with the Court of Tax Appeals
· CIR contentions:
- the claimed deduction of P75,000.00 was properly disallowed
because it was not an ordinary reasonable or necessary business
expense
- payments are fictitious because most of the payees are members
of the same family in control of Algue and that there is not
enough substantiation of such payments
· CTA: 75K had been legitimately paid by Algue Inc. for actual
services rendered in the form of promotional fees. These were
collected by the Payees for their work in the creation of the
Vegetable Oil Investment Corporation of the Philippines and its
subsequent purchase of the properties of the Philippine Sugar
Estate Development Company.
Issue: W/N the Collector of Internal Revenue correctly
disallowed the P75,000.00 deduction claimed by Algue as
legitimate business expenses in its income tax returns
Ruling:
· Taxes are the lifeblood of the government and so should be
collected without unnecessary hindrance, made in accordance
with law.
· RA 1125: the appeal may be made within thirty days after
receipt of the decision or ruling challenged
· During the intervening period, the warrant was premature and
could therefore not be served.
· Originally, CIR claimed that the 75K promotional fees to be
personal holding company income, but later on conformed to the
decision of CTA
· There is no dispute that the payees duly reported their
respective shares of the fees in their income tax returns and paid
the corresponding taxes thereon. CTA also found, after examining
the evidence, that no distribution of dividends was involved
· CIR suggests a tax dodge, an attempt to evade a legitimate
assessment by involving an imaginary deduction
· Algue Inc. was a family corporation where strict business
procedures were not applied and immediate issuance of receipts
was not required. at the end of the year, when the books were to
be closed, each payee made an accounting of all of the fees
received by him or her, to make up the total of P75,000.00. This
arrangement was understandable in view of the close
relationship among the persons in the family corporation
· The amount of the promotional fees was not excessive. The total
commission paid by the Philippine Sugar Estate Development Co.
to Algue Inc. was P125K. After deducting the said fees, Algue still
had a balance of P50,000.00 as clear profit from the transaction.
The amount of P75,000.00 was 60% of the total commission. This
was a reasonable proportion, considering that it was the payees
who did practically everything, from the formation of the
Vegetable Oil Investment Corporation to the actual purchase by it
of the Sugar Estate properties.
· Sec. 30 of the Tax Code: allowed deductions in the net income –
Expenses - All the ordinary and necessary expenses paid or
incurred during the taxable year in carrying on any trade or
business, including a reasonable allowance for salaries or other
compensation for personal services actually rendered xxx
· the burden is on the taxpayer to prove the validity of the claimed
deduction
· In this case, Algue Inc. has proved that the payment of the fees
was necessary and reasonable in the light of the efforts exerted
by the payees in inducing investors and prominent businessmen
to venture in an experimental enterprise and involve themselves
in a new business requiring millions of pesos.
· Taxes are what we pay for civilization society. Without taxes, the
government would be paralyzed for lack of the motive power to
activate and operate it. Hence, despite the natural reluctance to
surrender part of one's hard earned income to the taxing
authorities, every person who is able to must contribute his share
in the running of the government. The government for its part, is
expected to respond in the form of tangible and intangible
benefits intended to improve the lives of the people and enhance
their moral and material values
· Taxation must be exercised reasonably and in accordance with
the prescribed procedure. If it is not, then the taxpayer has a right
to complain and the courts will then come to his succor
Algue Inc.’s appeal from the decision of the CIR was filed on time
with the CTA in accordance with Rep. Act No. 1125. And we also
find that the claimed deduction by Algue Inc. was permitted
under the Internal Revenue Code and should therefore not have
been disallowed by the CIR
Tolentino v. Secretary of Finance
GR No. 115455
FACTS: Arturo Tolentino et al are questioning the
constitutionality of RA 7716 otherwise known as the Expanded
Value Added Tax (EVAT) Law. Tolentino averred that this
revenue bill did not exclusively originate from the House of
Representatives as required by Section 24, Article 6 of the
Constitution. Even though RA 7716 originated as HB 11197 and
that it passed the 3 readings in the HoR, the same did not
complete the 3 readings in Senate for after the 1 st reading it was
referred to the Senate Ways & Means Committee thereafter
Senate passed its own version known as Senate Bill 1630.
Tolentino averred that what Senate could have done is amend HB
11197 by striking out its text and substituting it with the text of
SB 1630 in that way “the bill remains a House Bill and the Senate
version just becomes the text (only the text) of the HB”. (It’s
ironic however to note that Tolentino and co-petitioner Raul
Roco even signed the said Senate Bill.)
RA 7716, otherwise known as the Expanded Value-Added Tax
Law, is an act that seeks to widen the tax base of the existing VAT
system and enhance its administration by amending the National
Internal Revenue Code. There are various suits questioning and
challenging the constitutionality of RA 7716 on various grounds.
Tolentino contends that RA 7716 did not originate exclusively
from the House of Representatives but is a mere consolidation of
HB. No. 11197 and SB. No. 1630 and it did not pass three readings
on separate days on the Senate thus violating Article VI, Sections
24 and 26(2) of the Constitution, respectively.
Art. VI, Section 24: All appropriation, revenue or tariff bills, bills
authorizing increase of the public debt, bills of local application,
and private bills shall originate exclusively in the House of
Representatives, but the Senate may propose or concur with
amendments.
Art. VI, Section 26(2): No bill passed by either House shall
become a law unless it has passed three readings on separate
days, and printed copies thereof in its final form have been
distributed to its Members three days before its passage, except
when the President certifies to the necessity of its immediate
enactment to meet a public calamity or emergency. Upon the last
reading of a bill, no amendment thereto shall be allowed, and the
vote thereon shall be taken immediately thereafter, and the yeas
and nays entered in the Journal.
ISSUE: Whether or not the EVAT law is procedurally infirm.
HELD: No. By a 9-6 vote, the Supreme Court rejected the
challenge, holding that such consolidation was consistent with
the power of the Senate to propose or concur with amendments
to the version originated in the HoR. What the Constitution
simply means, according to the 9 justices, is that the initiative
must come from the HoR. Note also that there were several
instances before where Senate passed its own version rather than
having the HoR version as far as revenue and other such bills are
concerned. This practice of amendment by substitution has
always been accepted. The proposition of Tolentino concerns a
mere matter of form. There is no showing that it would make a
significant difference if Senate were to adopt his over what has
been done.