DACQUEL V. SPOUSES SOTELO [G.R. No. 203946, August 4, 2021]

 

DACQUEL V. SPOUSES SOTELO

G.R. No. 203946, August 4, 2021

SECOND DIVISION, HERNANDO J.

 

Sales; Equitable Mortgage

Principle: An equitable mortgage exists when a property is used as security for a debt, without the intention of actually transferring ownership. Decisive for the proper determination of the true nature of the transaction between the parties is their intent, shown not merely by the contract's terminology but by the totality of the surrounding circumstances, such as acts, conduct, declarations, and negotiations leading to the agreement.

This involves a parcel of land in Malabon City, originally owned by the Spouses Sotelo. In 1994, the Sotelos borrowed P140,000.00 from Arturo Dacquel to finance the construction of a 7-door apartment on the land. To secure the loan, the Sotelos allegedly signed a Deed of Sale, transferring the land to Dacquel. However, the Sotelos claimed that they signed the document without fully comprehending its contents and that they were deceived by Dacquel's actions. They argued that the Deed of Sale was fraudulent and that Dacquel held the land in trust for them. They filed a complaint seeking to annul the title and regain ownership of the land, asserting that the Deed of Sale was merely intended as security for the loan and not an actual sale.

 

Dacquel, in defense claimed that the Deed of Sale was a valid agreement and that the Sotelos voluntarily offered to sell the land to him.

 

Whether the Deed of Sale executed between Dacquel and the Spouses Sotelo was a valid sale.

 

NO. The court ruled in favor of the Spouses Sotelo, declaring the Deed of Sale to be an equitable mortgage rather than a valid sale. It found that the Sotelos signed the document without understanding its contents and were deceived by Dacquel. The court acknowledged that Dacquel held the title to the land as security for the loan, and the true nature of the transaction was an equitable mortgage.

 

The court emphasized that the essential characteristic of an equitable mortgage is that it is intended as security for a debt and does not involve a valid transfer of ownership. In this case, the evidence presented supported the Sotelos' claim that the Deed of Sale was a mortgage and not an actual sale.

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CARDINEZ V. SPOUSES CARDINEZ [G.R. No. 213001, August 4, 2021]

 

CARDINEZ V. SPOUSES CARDINEZ

G.R. No. 213001, August 4, 2021

SECOND DIVISION, HERNANDO J.

 

Property; Donation; Consent

Principle: This case underscores the importance of voluntary and informed consent in donations. The court's decision to revoke the donation in this case serves as a reminder of the significance of genuine consent in the transfer of property rights through donations.

 

After the death of Simeona Cardinez, her sons Prudencio, Florentino, and Valentin inherited and divided the land among themselves. In 1994, Valentin asked Prudencio to donate a ten-square meter portion of his land that was being encroached by Valentin's balcony. Prudencio, trusting his brother, agreed and signed a document without understanding its contents. Prudencio later discovered that the document he signed was a Deed of Donation, allegedly transferring his inherited portion to Valentin's children. The Deed of Donation was not read or understood by Prudencio and his wife Cresencia when they signed it.

 

When Prudencio discovered this, he sought to revoke the donation, alleging lack of consent. The trial court ruled in his favor of Prudencio, revoking the donation due to fraudulent means. Court of Appeals affirmed the decision.

 

Whether the donation made by Spouses Cardinez should be revoked due to lack of consent.

 

 

YES. The Supreme Court affirmed the ruling of the trial court and upheld the revocation of the donation. Deed of Donation is void ab initio in the absence of respondents' consent.  

 

The court held that Prudencio’s testimony provided sufficient evidence to prove that the donation was fraudulently executed. The SC held that respondents did not give their consent to the donation of their land to petitioners. Hence, no valid donation had transpired between the parties.

 

It is clear that respondents did not donate their land. They never understood the full import of the document they signed because it was neither shown to them nor read by either Valenin or the notary public. Considering that they did not give their consent at all to the Deed of Donation, it is therefore null and void.

 

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Mandanas et. al v. Ochoa [G.R. No. 199802, April 10, 2019]

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Mandanas et. al v. Ochoa, G.R. No. 199802, April 10, 2019

 

FACTS: The fiscal autonomy guaranteed to local governments under Section 6, Article X of the 1987 Constitution means the power to create their own sources of revenue in addition to their equitable share in the "national taxes" released by the National Government, as well as the power to allocate their resources in accordance with their own priorities.

 

Pursuant to this Constitutional dictum, Congress enacted Republic Act No. 7160, otherwise known as the Local Government Code (LGC). Sec. 284 of the LGC provides that LGUs shall have an allotment equivalent to 40% of the the national internal revenue taxes. The share of the LGUs, known as the Internal Revenue Allotment (IRA), has been regularly released to the LGUs. Two petitions were filed to challenge the base figure for the computation of the IRA.

 

In G.R. No. 199802, Cong. Hermilando Mandanas, et al., alleged that the NIRTs certified by the BIR excluded the NIRTs collected by the Bureau of Customs, specifically excise taxes, value added taxes (VATs), and documentary stamp taxes (DSTs). Such exclusion resulted in LGUs being deprived of ₱60,750,000,000.00 for FY 2012. Further, the petitioners argued that since this mistake in computation was happening since 1992, then the National Government has effectively deprived LGUs of ₱438,103,906,675.73 in their IRA.

 

Meanwhile, in G.R. No. 208488, Cong. Enrique Garcia, Jr. sought the issuance of the writ of mandamus to compel respondents to compute the just share of the LGUs on the basis of all national taxes. He argued that the insertion by Congress of the words "internal revenue" in the phrase "national taxes" found in Section 284 of the LGC caused the diminution of the base for determining the just share of the LGUs, and should be declared unconstitutional.

 

ISSUE: Whether or not Section 284 of the LGC is unconstitutional for being repugnant to Section 6, Article X of the 1987 Constitution. -- YES.

 

HELD:

Section 6 of the Constitution mentions "national taxes" as the source of the just share of the LGUs while Section 284 of the LGC ordains that the share of the LGUs be taken from "national internal revenue taxes" instead. Congress thereby infringed the constitutional provision.

 

Although the power of Congress to make laws is plenary in nature, congressional lawmaking remains subject to the limitations stated in the 1987 Constitution.

 

The phrase "national internal revenue taxes" in Section 284 is undoubtedly more restrictive than the term "national taxes" written in Section 6 of the Constitution. As such, Congress has actually departed from the letter of the 1987 Constitution stating that national taxes should be the base from which the just share of the LGU comes. Such departure is impermissible. Verba legis non est recedendum (from the words of a statute there should be no departure).

 

Equally impermissible is that Congress has also thereby curtailed the guarantee of fiscal autonomy in favor of the LGUs under the 1987 Constitution. What the phrase "national internal revenue taxes" as used in Section 284 of the LGC included are all the taxes enumerated in Section 21 of the National Internal Revenue Code (NIRC), as amended by R.A. No. 8424, namely: income tax, estate and donor's taxes, VAT, other percentage taxes, excise taxes, documentary stamp taxes, and such other taxes as may be imposed and collected by the BIR.

 

In view of the foregoing enumeration of what are the national internal revenue taxes, Section 284 of the LGC has effectively deprived the LGUs from deriving their just share from other national taxes, like the customs duties.

 

Congress cannot disobey the express mandate of Section 6, Article X of the 1987 Constitution for the just share of the LGUs to be derived from the national taxes.

 

Moving forward, the BIR and the BOC are directed certify all national tax collections. This ruling, also known as the "Mandanas Ruling," is to be applied prospectively.

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CIR v. Covanta Energy Philippine Holdings, Inc. [G.R. No. 203160, January 24, 2018]

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CIR v. Covanta Energy Philippine Holdings, Inc.

G.R. No. 203160, January 24, 2018

 

Principle: While tax amnesty is in the nature of a tax exemption, which is strictly construed against the taxpayer.

 

Facts: The CIR issued Formal Letters of Demand and Assessment Notices against Covanta Energy Philippine Holdings, Inc. (CEPHI) for deficiency value-added tax (VAT) and expanded withholding tax (EWT).

 

CEPHI filed separate petitions before the CTA, seeking the cancellation and withdrawal of the deficiency assessments. Moreover, the CEPHI filed a supplemental petition, informing the CTA that it availed of the Tax Amnesty under RA 9480.

 

The CIR was of the position that CEPHI is not entitled to the immunities and privileges under R.A. No. 9480 because its documentary submissions failed to comply with the requirements under the tax amnesty law.

 

Issue: Whether or not Covanta Energy Philippine Holdings, Inc. (CEPHI) can avail the Tax Amnesty as provided under RA 9480.

 

Ruling: Yes, CEPHI is entitled to the immunities and privileges of the tax amnesty program upon full compliance with the requirements of R.A. No. 9480. R.A. No. 9480 governs the tax amnesty program for national internal revenue taxes for the taxable year 2005 and prior years. Subject to certain exceptions, a taxpayer may avail of this program by complying with the documentary submissions to the (BIR) and thereafter, paying the applicable amnesty tax.

Upon the taxpayer’s full compliance with these requirements, the taxpayer is immediately entitled to the enjoyment of the immunities and privileges of the tax amnesty program. But when: (a) the taxpayer fails to file a SALN and the Tax Amnesty Return; or (b) the net worth of the taxpayer in the SALN as of December 31, 2005 is proven to be understated to the extent of 30% or more, the taxpayer shall cease to enjoy these immunities and privileges.

 

The taxpayer’s SALN is presumed true and correct. The tax amnesty law thus places the burden of overturning this presumption to the parties who claim that there was an under declaration of the taxpayer’s net worth.

 

In this case, it is undisputed that CEPHI submitted all the documentary requirements for the tax amnesty program. The CIR argued, however, that CEPHI cannot enjoy the privileges attendant to the tax amnesty program because its SALN failed to comply with the requirements of R.A. No. 9480. The CIR specifically points to CEPHI’s supposed omission of the information relating to the Reference and Basis for Valuation columns in CEPHI’s original and amended SALNs.

 

However, aside from the bare allegations of the CIR, there is no evidence on record to prove that the amount of CEPHI’s net worth was understated. Neither was the CIR able to establish that there were findings or admissions in a congressional, administrative, or court proceeding that CEPHI indeed understated its net worth by 30%.

 

Considering that CEPHI completed the requirements and paid the corresponding amnesty tax, it is considered to have totally complied with the tax amnesty program. As a matter of course, CEPHI is entitled to the immediate enjoyment of the immunities and privileges of the tax amnesty program. Nonetheless, the Court emphasizes that the immunities and privileges granted to taxpayers under R.A. No. 9480 is not absolute. It is subject to a resolutory condition insofar as the taxpayers’ enjoyment of the immunities and privileges of the law is concerned. These immunities cease upon proof that they underdeclared their net worth by 30%.

 

Unfortunately for the CIR, however, there is no such proof in CEPHI’s case. The Court, thus, finds it necessary to deny the present petition. While tax amnesty is in the nature of a tax exemption, which is strictly construed against the taxpayer, the Court cannot disregard the plain text of R.A. No. 9480.

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CIR v. De La Salle University [G.R. Nos. 196596, 198841, 198941, November 9, 2016]

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CIR v. De La Salle University

 G.R. Nos. 196596, 198841, 198941, November 9, 2016

 

Principle: Incomes and revenues of non-stock, non-profit educational institutions are tax exempt if it is actually, directly, and exclusively used for educational purposes.

Test of exemption: the utilization of assets and income Tax exemption is source-blind; and applies as long as ADE rule is satisfied.

 

Facts: BIR issued a Formal Letter of Demand to assess DLSU on its deficiency on its payment of taxes which covers the following to wit: (1) income tax on rental earnings from restaurants/canteens and bookstores operating within the campus; (2) value-added tax (VAT) on business income; and (3) documentary stamp tax (DST) on loans and lease contracts.

 

The assessment was protested by DLSU. DLSU’s contention is anchored under its exemption from taxes as provided for under Constitution “All revenues and assets of non-stock, non-profit educational institutions used actually, directly, and exclusively for educational purposes shall be exempt from taxes and duties”

 

CIR argument:

(1) DLSU’s use of its revenues and assets for non-educational or commercial purposes removed these said items from the exemption coverage under the Constitution;

(2) DLSU’s rental income is taxable regardless of how much income is derived, use or disposed of. DLSU's operations of canteens and bookstores within its campus even though exclusively serving the university community do not negate income tax liability;

(3) Commissioner also argues that a tax-exempt organization such as DLSU is only exempt from property tax and not from income tax which is earned from leasing the property. Hence, DLSU’s income from the rentals earned is not tax exempt even if the proceeds are used for educational purposes.

 

Issue: Whether or DLSU's income and revenues proved to have been used actually, directly and exclusively for educational purposes are exempt from duties and taxes.

 

Ruling: Yes. DLSU’s income and revenues are proven to have been used actually, directly and exclusively for educational purposes and are tax exempt. TWO requisites: (1) The school must be non-stock and non-profit; and (2) The income is actually, directly and exclusively used for educational purposes. There are no other conditions and limitations.

 

Test of exemption: the utilization of assets and income Tax exemption is source-blind; and applies as long as ADE rule is satisfied. The tax exemption no longer hinges on the source from which the revenues were earned, but on the actual, direct and exclusive use of the revenues for educational purposes.  

 

The commercial use of the property is also not incidental to and reasonably necessary for the accomplishment of the main purpose of a university, which is to educate its students. Such income was spent by DLSU for building of a sports complex. The crucial point of inquiry then is on the use of the assets or on the use of the revenues. So long as the assets or revenues are used actually, directly and exclusively for educational purposes, they are exempt from duties and taxes.

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Henares v. St. Paul College of Makati G.R. No. 215383 (Resolution) March 8, 2017

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Jacinto-Henares v. St. Paul College of Makati

G.R. No. 215383 (Resolution)

March 8, 2017

 

Principle: Non-stock, non-profit educational institutions are constitutionally exempt from tax on all revenues derived in pursuance of its purpose as an educational institution and used actually, directly and exclusively for educational purposes. Provided that; (1) The school must be non-stock and non-profit; and (2) The income is actually, directly and exclusively used for educational purposes. There are no other conditions and limitations.

 

Facts: Petitioner Kim S. Henares, acting in her capacity as then CIR, issued an RMO - Prescribing the Policies and Guidelines in the Issuance of Tax Exemption Ruling. RMO No. 20-2013 adds a prerequisite to the requirement under Department of Finance Order No. 137-87, and makes failure to file an annual information return a ground for a nonstock, nonprofit educational institution to "automatically lose its income tax-exempt status." Applicants must submit an application for tax exemption to the BIR subject to approval by CIR in the form of a Tax Exemption Ruling (TER) which is valid for a period of three years and subject to renewal."

 

Respondent St. Paul College of Makati SPCM), a non-stock, non-profit educational institution filed action to declare RMO as unconstitutional. SPCM alleged that "RMO No. 20-2013 imposes as a prerequisite to the enjoyment by non-stock, non-profit educational institutions of the privilege of tax exemption under Sec. 4(3) of Article XIV of the Constitution both a registration and approval requirement.

 

Issue: Whether or not the RMO No. 20-2013 is unconstitutional.

 

Ruling: Petition denied; issue has become moot and academic.  The present CIR Caesar R. Dulay issued RMO No. 44-2016; this Order is being issued to exclude nonstock, non-profit educational institutions from the coverage of RMO 20-2013.

 

Non-stock, non-profit educational institutions are constitutionally exempt from tax on all revenues derived in pursuance of its purpose as an educational institution and used actually, directly and exclusively for educational purposes. This constitutional exemption gives the non-stock, non-profit educational institutions a distinct character.

 

And for the constitutional exemption to be enjoyed, jurisprudence and tax rulings affirm the doctrinal rule that there are only two requisites: (1) The school must be non-stock and non-profit; and (2) The income is actually, directly and exclusively used for educational purposes. There are no other conditions and limitations.

 

In this light, the constitutional conferral of tax exemption upon non-stock and non-profit educational institutions should not be implemented or interpreted in such a manner that will defeat or diminish the intent and language of the Constitution.

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CIR v. St. Luke’s Medical Center (G.R. No. 203514, February 13, 2017)

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CIR v. St. Luke’s Medical Center

 G.R. No. 203514, February 13, 2017

 

Income of whatever kind and character' of a charitable institution 'from any of its activities conducted for profit, regardless of the disposition made of such income, shall be subject to tax. ADE Rules is the test of exemption.

 

Facts: St. Luke's Medical Center, Inc (SLMC)is a non-stock and non-profit charitable institution earning revenues from services to paying patients. SLMC received a tax payment Assessment from the BIR.  Based on the assessment the respondent SLMC has a deficiency income tax.

 

SMLC protested. SLMC claimed that as a nonstock, non-profit charitable and social welfare organization under Section 30 (E) and (G) of the 1997 NIRC, as amended, it is exempt from paying income tax. However, SLMC received CIR’s final decision on the disputed Assessment increasing the deficiency income for the taxable years of 2005 and 2006.

 

Issue: Whether or not SLMC is liable for income tax under Section 27 (B) of the 1997 NIRC insofar as its revenues from paying patients are concerned.

 

Ruling: St. Luke's is organized as a non-stock and non-profit charitable institution.

However, this does not automatically exempt St. Luke's from paying taxes. St. Luke’s is a corporation that is not operated exclusively for charitable or social welfare purposes in so far as its revenues from paying patients are concerned.

 

A charitable institution is not ipso facto tax exempt. To be exempt from real property taxes, Article VI of the Constitution requires that a charitable institution use the property ‘actually, directly and exclusively’ for charitable purposes.

 

To be exempt from income taxes, Section 30(e) of the NIRC requires that a charitable institution must be organized and operated exclusively for charitable purposes.

The said provision qualifies the words ‘organized and operated exclusively’ which would mean that if a tax exempt charitable institution conducts any activity for profit such activity is not tax exempt even as it's not-for-profit activities remain tax exempt. It likewise qualifies the requirement that the civic organization must be operated exclusively for the promotion of social welfare.

 

But in case an exempt institution under Section 30 (E) or (G) of the Tax Code earns income from its for-profit activities, it will not lose its tax exemption. However, its income from for profit activities will be subject to income tax at the preferential 10% rate pursuant to Section 27 (B) thereof.

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