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THIRD DIVISION the records of the case reveal that petitioner adduced 5) The Office of the Register of Deeds of Valenzuela City,
G.R. No. 211666 February 25, 2015 evidence to show that the total amount deposited is just, fair, Metro Manila is directed to annotate this Decision in
REPUBLIC OF THE PHILIPPINES, represented by the and equitable. Specifically, in its Position Paper, petitioner Transfer Certificate of Title No. V-13790 registered under
DEPARTMENT OF PUBLIC WORKS AND alleged that pursuant to a Certification issued by the Bureau the name of Arlene R. Soriano.
HIGHWAYS, Petitioners, of Internal Revenue (BIR), Revenue Region No. 5, the zonal
Let a certified true copy of this decision be recorded in the
vs. ARLENE R. SORIANO, Respondent. value of the subject property in the amount of ₱2,100.00 per
Registry of Deeds of Valenzuela City.
DECISION square meter is reasonable, fair, and just to compensate the
PERALTA, J.: defendant for the taking of her property in the total area of Records of this case show that the Land Bank Manager’s
Before the Court is a petition for review under Rule 45 of the 200 square meters.9 In fact, Tax Declaration No. C-018- Check Nos. 0000016913 dated January 21, 2011 in the
Rules of Court assailing the Decision1 dated November 15, 07994, dated November 13, 2009 submitted by petitioner, amount of Php400,000.00 and 0000017263 dated April 28,
2013 and Order2 dated March 10, 2014 of the Regional Trial shows that the value of the subject property is at a lower rate 2011 in the amount of Php20,000.00 issued by the
Court (RTC), Valenzuela City, Branch 270, in Civil Case of ₱400.00per square meter. Moreover, as testified to by Department of Public Works and Highways (DPWH) are
No. 140-V-10. Associate Solicitor III Julie P. Mercurio, and as affirmed by already stale. Thus, the said Office is hereby directed to issue
the photographs submitted, the subject property is poorly another Manager’s Check in the total amount Php420,000.00
The antecedent facts are as follows: maintained, covered by shrubs and weeds, and not under the name of the Office of the Clerk of Court, Regional
On October 20, 2010, petitioner Republic of the Philippines, concretely-paved. It is located far from commercial or Trial Court, Valenzuela City earmarked for the instant
represented by the Department of Public Works and industrial developments in an area without a proper drainage case.10
Highways (DPWH), filed a Complaint3 for expropriation system, can only be accessed through a narrow dirt road, and
Petitioner filed a Motion for Reconsideration maintaining
against respondent Arlene R. Soriano, the registered owner is surrounded by adjacent dwellings of sub-standard
that pursuant to Bangko Sentral ng Pilipinas (BSP) Circular
of a parcel of land consisting of an area of 200 square meters, materials.
No. 799, Series of 2013, which took effect on July 1, 2013,
situated at Gen. T De Leon, Valenzuela City, and covered by
Accordingly, the RTC considered respondent to have waived the interest rate imposed by the RTC on just compensation
Transfer Certificate of Title (TCT) No. V-13790.4 In its
her right to adduce evidence and to object to the evidence should be lowered to 6% for the instant case falls under a
Complaint, petitioner averred that pursuant to Republic Act
submitted by petitioner for her continued absence despite loan or forbearance of money.11 In its Order12 dated March
(RA) No. 8974, otherwise known as "An Act to Facilitate the
being given several notices to do so. 10, 2014, the RTC reduced the interest rate to 6% per annum
Acquisition of Right-Of-Way, Site or Location for National
not on the basis of the aforementioned Circular, but on
Government Infrastructure Projects and for other Purposes," On November 15, 2013, the RTC rendered its Decision, the
Article 2209 of the Civil Code, viz.:
the property sought to be expropriated shall be used in dispositive portion of which reads: WHEREFORE, with the
implementing the construction of the North Luzon foregoing determination of just compensation, judgment is However, the case of National Power Corporation v.
Expressway (NLEX)- Harbor Link Project (Segment 9) from hereby rendered: Honorable Zain B. Angas is instructive.
NLEX to MacArthur Highway, Valenzuela City.5 In the aforementioned case law, which is similar to the
1) Declaring plaintiff to have lawful right to acquire
Petitioner duly deposited to the Acting Branch Clerk of possession of and title to 200 square meters of defendant instant case, the Supreme Court had the occasion to rule that
Court the amount of ₱420,000.00 representing 100% of the Arlene R. Soriano’s parcel of land covered by TCT V-13790 it is well-settled that the aforequoted provision of Bangko
zonal value of the subject property. Consequently, in an necessary for the construction of the NLEX – Harbor Link Sentral ng Pilipinas Circular applies only to a loan or
Order6 dated May 27, 2011, the RTC ordered the issuance of Project(Segment 9) from NLEX to MacArthur Highway forbearance of money, goods or credits. However, the term
a Writ of Possession and a Writ of Expropriation for failure Valenzuela City; "judgments" as used in Section 1 of the Usury Law and the
of respondent, or any of her representatives, to appear previous Central Bank Circular No. 416, should be
2) Condemning portion to the extent of 200 square meters of
despite notice during the hearing called for the purpose. interpreted to mean only judgments involving loan or
the above-described parcel of land including improvements
forbearance of money, goods or credits, following the
In another Order7 dated June 21, 2011, the RTC appointed thereon, if there be any, free from all liens and
principle of ejusdem generis. And applying said rule on
the following members of the Board of Commissioners for encumbrances;
statutory construction, the general term "judgments" can
the determination of just compensation: (1) Ms. Eunice O.
3) Ordering the plaintiff to pay defendant Arlene R. Soriano refer only to judgments in cases involving loans or
Josue, Officer-in-Charge, RTC, Branch 270, Valenzuela
Php2,100.00 per square meter or the sum of Four Hundred forbearance of any money, goods, or credits. Thus, the High
City; (2) Atty. Cecilynne R. Andrade, Acting Valenzuela
Twenty Thousand Pesos (Php420,000.00) for the 200 square Court held that, Art. 2209 of the Civil Code, and not the
City Assessor,City Assessor’s Office, Valenzuela City; and
meters as fair, equitable, and just compensation with legal Central Bank Circular, is the law applicable.
(3) Engr. Restituto Bautista, of Brgy. Bisig,Valenzuela City.
interest at 12% per annum from the taking of the possession
However, the trial court subsequently revoked the Art. 2009 of the Civil Code reads:
of the property, subject to the payment of all unpaid real
appointment of the Board for their failure to submit a report "If the obligation consists in the payment of a sum of money,
property taxes and other relevant taxes, if there be any;
as to the fair market value of the property to assist the court and the debtor incurs in delay, the indemnity for damages,
in the determination of just compensation and directed the 4) Plaintiff is likewise ordered to pay the defendant there being no stipulation to the contrary, shall be the
parties to submit their respective position consequential damages which shall include the value of the payment of the interest agreed upon, and in the absence of
papers.8 Thereafter, the case was set for hearing giving the transfer tax necessary for the transfer of the subject property stipulation, the legal interest, which is six per cent per
parties the opportunity to present and identify all evidence in from the name of the defendant to that of the plaintiff; annum."
support of their arguments therein. According to the RTC,
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Further in that case, the Supreme Court explained that the At the outset, it must be noted that the RTC’s reliance on Notwithstanding the foregoing, We find that the imposition
transaction involved is clearly not a loan or forbearance of National Power Corporation v. Angas is misplaced for the of interest in this case is unwarranted in view of the fact that
money, goods or credits but expropriation of certain parcels same has already been overturned by our more recent ruling as evidenced by the acknowledgment receipt19 signed by the
of land for a public purpose, the payment of which is without in Republic v. Court of Appeals,16 wherein we held that the Branch Clerk of Court, petitioner was able to deposit with
stipulation regarding interest, and the interest adjudged by payment of just compensation for the expropriated property the trial court the amount representing the zonal value of the
the trial court is in the nature of indemnity for damages. The amounts to an effective forbearance on the part of the State, property before its taking. As often ruled by this Court, the
legal interest required to be paid on the amount of just to wit: award of interest is imposed in the nature of damages for
compensation for the properties expropriated is manifestly delay in payment which, in effect, makes the obligation on
Aside from this ruling, Republic notably overturned the
in the form of indemnity for damages for the delay in the the part of the government one of forbearance to ensure
Court’s previous ruling in National Power Corporation v.
payment thereof. It ultimately held that Art. 2209 of the Civil prompt payment of the value of the land and limit the
Angas which held that just compensation due for
Code shall apply.13 opportunity loss of the owner.20 However, when there is no
expropriated properties is not a loan or forbearance of money
delay in the payment of just compensation, We have not
On May 12, 2014, petitioner filed the instant petition but indemnity for damages for the delay in payment; since
hesitated in deleting the imposition of interest thereon for the
invoking the following arguments: the interest involved is in the nature of damages rather than
same is justified only in cases where delay has been
earnings from loans, then Art. 2209 of the Civil Code, which
I. sufficiently established.21
fixes legal interest at 6%, shall apply.
RESPONDENT IS NOT ENTITLED TO THE LEGAL The records of this case reveal that petitioner did not delay
In Republic, the Court recognized that the just compensation
INTEREST OF 6% PER ANNUM ON THE AMOUNT OF in its payment of just compensation as it had deposited the
due to the landowners for their expropriated property
JUST COMPENSATION OF THE SUBJECT PROPERTY pertinent amount in full due to respondent on January 24,
amounted to an effective forbearance on the part of the State.
AS THERE WAS NO DELAY ON THE PART OF 2011, or four (4) months before the taking thereof, which
Applying the Eastern Shipping Lines ruling, the Court fixed
PETITIONER. was when the RTC ordered the issuance of a Writ of
the applicable interest rate at 12% per annum, computed
Possession and a Writ of Expropriation on May 27, 2011.
II. from the time the property was taken until the full amount of
The amount deposited was deemed by the trial court to be
just compensation was paid, in order to eliminate the issue
BASED ON THE NATIONAL INTERNAL REVENUE just, fair, and equitable, taking into account the well-
of the constant fluctuation and inflation of the value of the
CODE OF 1997 AND THE LOCAL GOVERNMENT established factors in assessing the value of land, such as its
currency over time. In the Court’s own words:
CODE, IT IS RESPONDENT’S OBLIGATION TO PAY size, condition, location, tax declaration, and zonal valuation
THE TRANSFER TAXES. The Bulacan trial court, in its 1979 decision, was correct in as determined by the BIR. Considering, therefore, the
imposing interest[s] on the zonal value of the property to be prompt payment by the petitioner of the full amount of just
Petitioner maintains that if property is taken for public use
computed from the time petitioner instituted condemnation compensation as determined by the RTC, We find that the
before compensation is deposited with the court having
proceedings and "took" the property in September 1969. imposition of interest thereon is unjustified and should be
jurisdiction over the case, the final compensation must
This allowance of interest on the amount found to be the deleted.
include interests on its just value computed from the time the
value of the property as of the time of the taking computed,
property is taken up to the time when compensation is Similarly, the award of consequential damages should
being an effective forbearance, at 12% per annum should
actually paid or deposited with the court.14 Thus, legal likewise be deleted in view of the fact that the entire area of
help eliminate the issue of the constant fluctuation and
interest applies only when the property was taken prior to the the subject property is being expropriated, and not merely a
inflation of the value of the currency over time.
deposit of payment with the court and only to the extent that portion thereof, wherein such remaining portion suffers an
there is delay in payment. In the instant case, petitioner We subsequently upheld Republic’s 12% per annum interest impairment or decrease in value, as enunciated in Republic
posits that since it was able to deposit with the court the rate on the unpaid expropriation compensation in the of the Philippines v. Bank of the Philippine Islands,22 thus:
amount representing the zonal value of the property before following cases: Reyes v. National Housing Authority, Land
x x x The general rule is that the just compensation to which
its taking, it cannot be said to be in delay, and thus, there can Bank of the Philippines v. Wycoco, Republic v. Court of
the owner of the condemned property is entitled to is the
be no interest due on the payment of just Appeals, Land Bank of the Philippines v. Imperial,
market value. Market value is that sum of money which a
compensation.15 Moreover, petitioner alleges that since the Philippine Ports Authority v. Rosales-Bondoc, and Curata v.
person desirous but not compelled to buy, and an owner
entire subject property was expropriated and not merely a Philippine Ports Authority.17 Effectively, therefore, the debt
willing but not compelled to sell, would agree on as a price
portion thereof, it did not suffer an impairment or decrease incurred by the government on account of the taking of the
to be paid by the buyer and received by the seller. The
in value, rendering the award of consequential damages property subject of an expropriation constitutes a
general rule, however, is modified where only a part of a
nugatory. Furthermore, petitioner claims that contrary to the forbearance18 which runs contrary to the trial court’s opinion
certain property is expropriated. In such a case, the owner is
RTC’s instruction, transfer taxes, in the nature of Capital that the same is in the nature of indemnity for damages
not restricted to compensation for the portion actually taken,
Gains Tax and Documentary Stamp Tax, necessary for the calling for the application of Article 2209 of the Civil Code.
he is also entitled to recover the consequential damage, if
transfer of the subject property from the name of the Nevertheless, in line with the recent circular of the Monetary
any, to the remaining part of the property.
respondent to that of the petitioner are liabilities of Board of the Bangko Sentral ng Pilipinas (BSP-MB) No.
xxxx
respondent and not petitioner. 799, Series of 2013, effective July 1, 2013, the prevailing
No actual taking of the building is necessary to grant
rate of interest for loans or forbearance of money is six
The petition is partly meritorious. consequential damages. Consequential damages are
percent (6%) per annum, in the absence of an express
awarded if as a result of the expropriation, the remaining
contract as to such rate of interest.
3 of 15
property of the owner suffers from an impairment or classified as capital assets, including pacto de retro sales and conveyed to the purchaser, or purchasers, or to any other
decrease in value. The rules on expropriation clearly provide other forms of conditional sales, by individuals, including person or persons designated by such purchaser or
a legal basis for the award of consequential damages. Section estates and trusts: Provided, That the tax liability, if any, on purchasers, there shall be collected a documentary stamp tax,
6 of Rule 67 of the Rules of Court provides: gains from sales or other disposition of real property to the at the rates herein below prescribed, based on the
government or any of its political subdivisions or agencies consideration contracted to be paid for such realty or on its
x x x The commissioners shall assess the consequential
or to government-owned or controlled corporations shall be fair market value determined in accordance with Section
damages to the property not taken and deduct from such
determined either under Section 24(A)or under this 6(E) of this Code, whichever is higher: Provided, That when
consequential damages the consequential benefits to be
Subsection, at the option of the taxpayer. one of the contracting parties is the Government, the tax
derived by the owner from the public use or public purpose
xxxx herein imposed shall be based on the actual consideration:
of the property taken, the operation of its franchise by the
Section 56. Payment and Assessment of Income Tax for (a) When the consideration, or value received or contracted
corporation or the carrying on of the business of the
Individuals and Corporations. – (A) Payment of Tax – to be paid for such realty, after making proper allowance of
corporation or person taking the property. But in no case
xxxx any encumbrance, does not exceed One thousand pesos
shall the consequential benefits assessed exceed the
(3) Payment of Capital Gains Tax. - The total amount of tax (₱1,000), Fifteen pesos (₱15.00).
consequential damages assessed, or the owner be deprived
imposed and prescribed under Section 24 (c), 24(D),
of the actual value of his property so taken. (b) For each additional One thousand pesos (₱1,000), or
27(E)(2), 28(A)(8)(c) and 28(B)(5)(c) shall be paid on the
fractional part thereof in excess of One thousand pesos
In B.H. Berkenkotter & Co. v. Court of Appeals, we held date the return prescribed therefor is filed by the person
(₱1,000) of such consideration or value, Fifteen pesos
that: liable thereto: Provided, That if the seller submits proof of
(₱15.00).
To determine just compensation, the trial court should first his intention to avail himself of the benefit of exemption of
ascertain the market value of the property, to which should capital gains under existing special laws, no such payments When it appears that the amount of the documentary stamp
be added the consequential damages after deducting shall be required : Provided, further, That in case of failure tax payable hereunder has been reduced by an incorrect
therefrom the consequential benefits which may arise from to qualify for exemption under such special laws and statement of the consideration in any conveyance, deed,
the expropriation. If the consequential benefits exceed the implementing rules and regulations, the tax due on the gains instrument or writing subject to such tax the Commissioner,
consequential damages, these items should be disregarded realized from the original transaction shall immediately provincial or city Treasurer, or other revenue officer shall,
altogether as the basic value of the property should be paid become due and payable, subject to the penalties prescribed from the assessment rolls or other reliable source of
in every case.23 under applicable provisions of this Code: Provided, finally, information, assess the property of its true market value and
That if the seller, having paid the tax, submits such proof of collect the proper tax thereon.
Considering that the subject property is being expropriated
intent within six (6) months from the registration of the
in its entirety, there is no remaining portion which may Yet, a perusal of the provision cited above does not explicitly
document transferring the real property, he shall be entitled
suffer an impairment or decrease in value as a result of the impute the obligation to pay the documentary stamp tax on
to a refund of such tax upon verification of his compliance
expropriation. Hence, the award of consequential damages the seller. In fact, according to the BIR, all the parties to a
with the requirements for such exemption.
is improper. transaction are primarily liable for the documentary stamp
Thus, it has been held that since capital gains is a tax on tax, as provided by Section 2 of BIR Revenue Regulations
Anent petitioner’s contention that it cannot be made to pay
passive income, it is the seller, not the buyer, who generally No. 9-2000, which reads:26
the value of the transfer taxes in the nature of capital gains
would shoulder the tax.24 Accordingly, the BIR, in its BIR SEC. 2. Nature of the Documentary Stamp Tax and Persons
tax and documentary stamp tax, which are necessary for the
Ruling No. 476-2013, dated December 18, 2013, constituted Liable for the Tax. –
transfer of the subject property from the name of the
the DPWH as a withholding agent to withhold the six percent
respondent to that of the petitioner, the same is partly (a) In General. - The documentary stamp taxes under Title
(6%) final withholding tax in the expropriation of real
meritorious. VII of the Code is a tax on certain transactions.1âwphi1 It is
property for infrastructure projects. As far as the government
imposed against "the person making, signing, issuing,
With respect to the capital gains tax, We find merit in is concerned, therefore, the capital gains tax remains a
accepting, or transferring" the document or facility
petitioner’s posture that pursuant to Sections 24(D) and liability of the seller since it is a tax on the seller's gain from
evidencing the aforesaid transactions. Thus, in general, it
56(A)(3) of the 1997 National Internal Revenue Code the sale of the real estate.25
may be imposed on the transaction itself or upon the
(NIRC), capital gains tax due on the sale of real property is
As to the documentary stamp tax, however, this Court document underlying such act. Any of the parties thereto
a liability for the account of the seller, to wit:
finds inconsistent petitioner’s denial of liability to the same. shall be liable for the full amount of the tax due: Provided,
Section 24. Income Tax Rates–
Petitioner cites Section 196 of the 1997 NIRC as its basis in however, that as between themselves, the said parties may
xxxx
saying that the documentary stamp tax is the liability of the agree on who shall be liable or how they may share on the
(D) Capital Gains from Sale of Real Property. –
seller, viz.: cost of the tax.
(1) In General. – The provisions of Section 39(B)
notwithstanding, a final tax of six percent (6%) based on the SECTION 196. Stamp Tax on Deeds of Sale and (b) Exception. - Whenever one of the parties to the taxable
gross selling price or current fair market value as determined Conveyances of Real Property. - On all conveyances, deeds, transaction is exempt from the tax imposed under Title VII
in accordance with Section 6(E) of this Code, whichever is instruments, or writings, other than grants, patents or of the Code, the other party thereto who is not exempt shall
higher, is hereby imposed upon capital gains presumed to original certificates of adjudication issued by the be the one directly liable for the tax.27
have been realized from the sale, exchange, or other Government, whereby any land, tenement or other realty
As a general rule, therefore, any of the parties to a transaction
disposition of real property located in the Philippines, sold shall be granted, assigned, transferred or otherwise
shall be liable for the full amount of the documentary stamp
4 of 15
tax due, unless they agree among themselves on who shall
be liable for the same.
In this case, there is no agreement as to the party liable for
the documentary stamp tax due on the sale of the land to be
expropriated. But while petitioner rejects any liability for the
same, this Court must take note of petitioner’s Citizen’s
Charter,28 which functions as a guide for the procedure to be
taken by the DPWH in acquiring real property through
expropriation under RA 8974. The Citizen’s Charter, issued
by petitioner DPWH itself on December 4,2013, explicitly
provides that the documentary stamp tax, transfer tax, and
registration fee due on the transfer of the title of land in the
name of the Republic shall be shouldered by the
implementing agency of the DPWH, while the capital gains
tax shall be paid by the affected property owner.29 Thus,
while there is no specific agreement between petitioner and
respondent, petitioner's issuance of the Citizen's Charter
serves as its notice to the public as to the procedure it shall
generally take in cases of expropriation under RA 8974.
Accordingly, it will be rather unjust for this Court to blindly
accede to petitioner's vague rejection of liability in the face
of its issuance of the Citizen's Charter, which contains a clear
and unequivocal assumption of accountability for the
documentary stamp tax. Had petitioner provided this Court
with more convincing basis, apart from a mere citation of an
indefinite provision of the 1997 NIRC, showing that it
should be respondent-seller who shall be liable for the
documentary stamp tax due on the sale of the subject
property, its rejection of the payment of the same could have
been sustained. WHEREFORE, premises considered, the
instant pet1t10n 1s PARTIALLY GRANTED. The Decision
and Order, dated November 15, 2013 and March 10, 2014,
respectively, of the Regional Trial Court, Valenzuela City,
Branch 270, in Civil Case No. 140-V-10 are hereby
MODIFIED, in that the imposition of interest on the
payment of just compensation as well as the award of
consequential damages are deleted. In addition, respondent
Arlene R. Soriano is ORDERED to pay for the capital gains
tax due on the transfer of the expropriated property, while
the documentary stamp tax, transfer tax, and registration fee
shall be for the account of petitioner.
SO ORDERED.
SECOND DIVISION
5 of 15
G.R. No. 179063 October 23, 2009 when the taxable document was made, signed, accepted or But the Supreme Court had occasion under its resolution in
COMMISSIONER OF INTERNAL transferred. These taxes accrued upon the lapse of the Administrative Matter 99-10-05-08 to rule that the certificate
REVENUE, Petitioner, redemption period of the mortgaged properties. The CIR of sale shall issue only upon approval of the executive judge
vs. UNITED COCONUT PLANTERS pointed out that the mortgagor, a juridical person, had three who must, in the interest of fairness, first determine that the
BANK, Respondent. months after foreclosure within which to redeem the requirements for extrajudicial foreclosures have been strictly
DECISION properties.5 followed. For instance, in United Coconut Planters Bank v.
ABAD, J.: Yap,9 this Court sustained a judge’s resolution requiring
The CIR theorized that the three-month redemption period
This is an action involving a disputed assessment for payment of notarial commission as a condition for the
was to be counted from the date of the foreclosure sale. Here,
deficiencies in the payment of creditable withholding tax and issuance of the certificate of sale to the highest bidder.
he said, the redemption period lapsed three months from
documentary stamps tax due from a foreclosure sale.
December 31, 2001 or on March 31, 2002. Thus, UCPB was Here, the executive judge approved the issuance of the
in default for having paid the CWT and DST only on July 5, certificate of sale to UCPB on March 1, 2002. Consequently,
The Facts and the Case
2002. For this reason the CIR issued a Pre-Assessment the three-month redemption period ended only on June 1,
Respondent United Coconut Planters Bank (UCPB) granted
Notice6 and, subsequently, a Final Assessment Notice7 to 2002. Only on this date then did the deadline for payment of
loans of ₱68,840,000.00 and ₱335,000,000.00 to George C.
UCPB for deficiency CWT of ₱8,617,210.00 and deficiency CWT and DST on the extrajudicial foreclosure sale become
Co, Go Tong Electrical Supply Co., Inc., and Tesco Realty
DST of ₱2,173,051.75. due.
Co. that the borrowers caused to be secured by several real
estate mortgages. When the latter later failed to pay their UCPB protested the assessment. It claimed that the Under Section 2.58 of Revenue Regulation 2-98, the CWT
loans, UCPB filed a petition for extrajudicial foreclosure of redemption period lapsed on June 1, 2002 or three months return and payment become due within 10 days after the end
the mortgaged properties. Pursuant to that petition, on after the executive judge of Manila approved the issuance of of each month, except for taxes withheld for the month of
December 31, 2001 a notary public for Manila held a public the certificate of sale. "Foreclosure" under Section 47 of the December of each year, which shall be filed on or before
auction sale of the mortgaged properties. UCPB made the General Banking Law, said UCPB, referred to the date of January 15 of the following year. On the other hand, under
highest winning bid of ₱504,785,000.00 for the whole lot. approval by the executive judge, and not the date of the Section 5 of Revenue Regulation 06-01, the DST return and
auction sale. But the CIR denied UCPB’s protest, prompting payment become due within five days after the close of the
On January 4, 2002 the notary public submitted the
UCPB to file a petition for review with the CTA in CTA month when the taxable document was made, signed,
Certificate of Sale to the Executive Judge of Regional Trial
Case 7164. accepted, or transferred.
Court (RTC) of Manila for his approval.1 But, on February
18, 2002 the executive judge returned it with instruction to On July 26, 2006 the CTA Second Division set aside the The BIR confirmed and summarized the above provisions
the notary public to explain an inconsistency in the tax decision of the CIR and held that the redemption period under Revenue Memorandum Circular 58-2008 in this
declaration of one mortgaged property. The executive judge lapsed three months after the executive judge approved the manner:
further ordered the notary public to show proof of payment certificate of sale. It said that "foreclosure" under the law
[I]f the property is an ordinary asset of the mortgagor, the
of the Sheriff’s percentage of the bid price.2 The notary referred to the whole process of foreclosure which included
creditable expanded withholding tax shall be due and paid
public complied.3 On March 1, 2002 the executive judge the approval and issuance of the certificate of sale. There
within ten (10) days following the end of the month in which
finally signed the certificate of sale and approved its was no sale to speak of which could be taxed prior to such
the redemption period expires. x x x Moreover, the payment
issuance to UCPB as the highest bidder.4 approval and issuance. Since the executive judge approved
of the documentary stamp tax and the filing of the return
the issuance only on March 1, 2002, the redemption period
On June 18, 2002 UCPB presented the certificate of sale to thereof shall have to be made within five (5) days from the
expired on June 1, 2002. Hence, UCPB’s payments of CWT
the Register of Deeds of Manila for annotation on the end of the month when the redemption period
and DST in early July were well within the prescribed
transfer certificates of title of the foreclosed properties. On expires.1avvphi1
period. On appeal to the CTA En Banc in CTA EB 234, the
July 5, 2002 the bank paid creditable withholding taxes
latter affirmed the decision of the Second Division on June UCPB had, therefore, until July 10, 2002 to pay the CWT
(CWT) of ₱28,640,700.00 and documentary stamp taxes
5, 2007. With the denial of its motion for reconsideration, and July 5, 2002 to pay the DST. Since it paid both taxes on
(DST) of ₱7,160,165.00 in relation to the extrajudicial
petitioner has taken recourse to this Court via a petition for July 5, 2002, it is not liable for deficiencies. Thus, the Court
foreclosure sale. It then submitted an affidavit of finds no reason to reverse the decision of the CTA.
review on certiorari.
consolidation of ownership to the Bureau of Internal
Issue
Revenue (BIR) with proof of tax payments and other Besides, on August 15, 2008, the Bureau of Internal Revenue
The key issue in this case is whether or not the three-month
documents in support of the bank’s application for a tax issued Revenue Memorandum Circular 58-2008 10 which
redemption period for juridical persons should be reckoned
clearance certificate and certificate authorizing registration. clarified among others, the time within which to reckon the
from the date of the auction sale.
redemption period of real estate mortgages. It reads:
Petitioner Commissioner of Internal Revenue (CIR), Ruling
however, charged UCPB with late payment of the The CIR argues that he has the more reasonable position: the For purposes of reckoning the one-year redemption period
corresponding DST and CWT, citing Section 2.58 of redemption period should be reckoned from the date of the in the case of individual mortgagors, or the three-month
Revenue Regulation 2-98, which stated that the CWT must auction sale for, otherwise, the taxing authority would be left redemption period for juridical persons/mortgagors, the
be paid within 10 days after the end of each month, and at the mercy of the executive judge who may unnecessarily same shall be reckoned from the date of the confirmation
Section 5 of Revenue Regulation 06-01, which required delay the approval of the certificate of sale and thus prevent of the auction sale which is the date when the certificate of
payment of DST within five days after the close of the month the early payment of taxes. sale is issued.
6 of 15
The CIR must have in the meantime conceded the
unreasonableness of the previous position it had taken on
this matter.
WHEREFORE, the petition is DENIED.
SO ORDERED.
7 of 15
THIRD DIVISION Less: Unapplied Payment 908,241.01 charges totaling ₱5,331,237.77, with prayer for damages and
G.R. No. 165617 February 25, 2011 attorney’s fees, docketed as Civil Case No. 97-72 of the
SUPREME TRANSLINER, INC., MOISES C. Regional Trial Court of Lucena City, Branch 57.
ALVAREZ and PAULITA S. ALVAREZ, Petitioners, Total Amount Due As Of 08/07/96 10,372,711.35 In its Answer with Special and Affirmative Defenses and
vs. BPI FAMILY SAVINGS BANK, INC., Respondent. (Auction Date) Counterclaim, the bank asserted that the redemption price
G.R. No. 165837
reflecting the stipulated interest, charges and/or expenses, is
BPI FAMILY SAVINGS BANK, INC., Petitioner, Add: Attorney’s Fees (15%) 1,555,906.70 valid, legal and in accordance with documents duly signed
vs. SUPREME TRANSLINER, INC., MOISES C.
by the mortgagors. The bank further contended that the
ALVAREZ and PAULITA S. ALVAREZ, Respondents. Liquidated Damages (15%) 1,555,906.70
claims are deemed waived and the mortgagors are already
DECISION
Interest on P 10,372,711.35 from 1,207,772.58 estopped from questioning the terms and conditions of their
VILLARAMA, JR., J.:
contract.
This case involves the question of the correct redemption 08/07/96 to
price payable to a mortgagee bank as purchaser of the 04/07/97 (243 days) at 17.25% p.a. On September 30, 1997, the bank filed a motion to set the
property in a foreclosure sale. case for hearing on the special and affirmative defenses by
On April 24, 1995, Supreme Transliner, Inc. represented by x x x x way of motion to dismiss. The trial court denied the motion
its Managing Director, Moises C. Alvarez, and Paulita S. Asset Acquired Expenses: on January 8, 1998 and also denied the bank’s motion for
Alvarez, obtained a loan in the amount of ₱9,853,000.00 reconsideration. The bank elevated the matter to the Court of
from BPI Family Savings Bank with a 714-square meter lot Documentary Stamps 155,595.00 Appeals (CA-G.R. SP No. 47588) which dismissed the
covered by Transfer Certificate of Title No. T-79193 in the petition for certiorari on February 26, 1999.
name of Moises C. Alvarez and Paulita S. Alvarez, as Capital Gains Tax 518,635.57
On February 14, 2002, the trial court rendered its
collateral.1 Foreclosure Fee 207,534.23 decision5 dismissing the complaint and the bank’s
For non-payment of the loan, the mortgage was counterclaims. The trial court held that plaintiffs-mortgagors
extrajudicially foreclosed and the property was sold to the Registration and Filing Fee 23,718.00 are bound by the terms of the mortgage loan documents
bank as the highest bidder in the public auction conducted which clearly provided for the payment of the following
by the Office of the Provincial Sheriff of Lucena City. On Add’l. Registration & Filing Fee 660.00 906,142.79 interest, charges and expenses: 18% p.a. on the loan, 3%
August 7, 1996, a Certificate of Sale2 was issued in favor of post-default penalty, 15% liquidated damages, 15%
the bank and the same was registered on October 1, 1996. Interest on P 906,142.79 from 08/07/96 105,509.00 attorney’s fees and collection and legal costs. Plaintiffs-
to mortgagors’ claim that they paid the redemption price
Before the expiration of the one-year redemption period, the
demanded by the defendant bank under extreme pressure
mortgagors notified the bank of their intention to redeem the 04/07/97 (243 days)
was rejected by the trial court since there was active
property. Accordingly, the following Statement of at 17.25% p.a.
negotiation for the final redemption price between the bank’s
Account3 was prepared by the bank indicating the total
representatives and plaintiffs-mortgagors who at the time
amount due under the mortgage loan agreement: Cancellation Fee 300.00 had legal advice from their counsel, together with Orient
xxxx
Development Banking Corporation which committed to
finance the redemption.
Balance of Principal P 9,551,827.64 According to the trial court, plaintiffs-mortgagors are
estopped from questioning the correctness of the redemption
Total Amount Due As Of 04/07/97 P price as they had freely and voluntarily signed the letter-
Add: Interest Due 1,417,761.24 (Subject to Audit) 15,704,249.12 agreement prepared by the defendant bank, and along with
Orient Bank expressed their conformity to the terms and
Late Payment Charges 155,546.25
conditions therein, thus:
MRI 0.00 May 14, 1997
xxxx ORIENT DEVELOPMENT BANKING CORPORATION
Fire Insurance 0.00 The mortgagors requested for the elimination of liquidated 7th Floor Ever Gotesco Corporate Center
damages and reduction of attorney’s fees and interest (1% C.M. Recto Avenue corner Matapang Street
Foreclosure Expenses 155,817.23 per month) but the bank refused. On May 21, 1997, the Manila
mortgagors redeemed the property by paying the sum of Attention: MS. AIDA C. DELA ROSA
₱15,704,249.12. A Certificate of Redemption4 was issued by Senior Vice-President
Sub-total P the bank on May 27, 1997. Gentlemen:
11,280,952.36 This refers to your undertaking to settle the account of
On June 11, 1997, the mortgagors filed a complaint against SUPREME TRANS LINER, INC. and spouses MOISES C.
the bank to recover the allegedly unlawful and excessive ALVAREZ and PAULITA S. ALVAREZ, covering the real
8 of 15
estate property located in the Poblacion, City of Lucena CONFORME: price for fear that the redemption period will expire without
under TCT No. T-79193 which was foreclosed by BPI SUPREME TRANS LINER, INC. them redeeming their property.9
FAMILY SAVINGS BANK, INC. (SGD.) MOISES C. ALVAREZ/PAULITA S. ALVAREZ
By Resolution10 dated October 12, 2004, the CA denied the
Mortgagors6
With regard to the proposed refinancing of the account, we parties’ respective motions for reconsideration.
(Underscoring in the original; emphasis supplied.)
interpose no objection to the annotation of your mortgage
Hence, these petitions separately filed by the mortgagors and
lien thereon subject to the following conditions: As to plaintiffs-mortgagors’ contention that the amounts
the bank.
representing attorney’s fees and liquidated damages were
1. That all expenses for the registration of the annotation of
already included in the ₱10,372,711.35 bid price, the trial In G.R. No. 165617, the petitioners-mortgagors raise the
mortgage and other incidental registration and cancellation single issue of whether the foreclosing mortgagee should pay
court said this was belied by their own evidence, the
expenses shall be borne by the borrower. Statement of Account showing the breakdown of the capital gains tax upon execution of the certificate of sale, and
redemption price as computed by the defendant bank. if paid by the mortgagee, whether the same should be
2. That you will recognize our mortgage liens as first and
shouldered by the redemptioner. They specifically prayed
superior until the loan with us is fully paid. The mortgagors appealed to the CA (CA-G.R. CV No.
for the return of all asset-acquired expenses consisting of
74761) which, by Decision7 dated April 6, 2004 reversed the
documentary stamps tax, capital gains tax, foreclosure fee,
3. That you will annotate your mortgage lien and pay us the trial court and decreed as follows:
registration and filing fee, and additional registration and
full amount to close the loan within five (5) working days
WHEREFORE, foregoing considered, the appealed decision filing fee totaling ₱906,142.79, with 6% interest thereon
from the receipt of the titles. If within this period, you have is hereby REVERSED and SET ASIDE. A new one is from May 21, 1997.11
not registered the same and paid us in full, you will hereby entered as follows:
immediately and unconditionally return the titles to us On the other hand, the petitioner bank in G.R. No. 165837
without need of demand, free from liens/encumbrances other 1. Plaintiffs-appellants’ complaint for damages against assails the CA in holding that –
than our lien. defendant-appellee is hereby REINSTATED; 1. … the Certificate of Sale, the bid price of P10,372,711.35
2. Defendant-appellee is hereby ORDERED to return to includes penalty charges and as such for purposes of
4. That in case of loss of titles, you will undertake and computing the redemption price petitioner can no longer
shoulder the cost of re-issuance of a new owner’s titles. plaintiffs-appellees (sic) the invalidly collected amount of
P3,111,813.40 plus six (6) percent legal interest from May impose upon the private respondents the penalty charges in
5. That we will issue the Certificate of Redemption after full 21, 1997 until fully returned; the form of 15% attorney’s fees and the 15% liquidated
payment of P15,704,249.12. representing the outstanding damages in the aggregate amount of P3,111,813.40,
balance of the loan as of May 15, 1997 including interest and 3. Defendant-appellee is hereby ORDERED to pay although the evidence presented by the parties show
plaintiffs-appellees (sic) the amount of P100,000.00 as otherwise.
other charges thereof within a period of five (5) working
days after clearance of the check payment. moral damages, P100,000.00 as exemplary damages and
P100,000.00 as attorney’s fees; 2. … private respondents cannot be considered to be under
6. That we will release the title and the Certificate of estoppel to question the propriety of the aforestated penalty
Redemption and other pertinent papers only to your 4. Costs against defendant-appellee. charges despite the fact that, as found by the Honorable Trial
Court, "there was very active negotiation between the parties
authorized representative with complete authorization and SO ORDERED.8
identification. in the computation of the redemption price" culminating into
The CA ruled that attorney’s fees and liquidated damages the signing freely and voluntarily by the petitioner, the
7. That all expenses related to the cancellation of your were already included in the bid price of ₱10,372,711.35 as private respondents and Orient Bank, which financed the
annotated mortgage lien should the Bank be not fully paid per the recitals in the Certificate of Sale that said amount was redemption of the foreclosed property, of Exhibit "3",
on the period above indicated shall be charged to you. paid to the foreclosing mortgagee to satisfy not only the wherein they mutually agreed that the redemption price is in
principal loan but also "interest and penalty charges, cost of the sum of P15,704,249.12.
If you find the foregoing conditions acceptable, please publication and expenses of the foreclosure proceedings."
indicate your conformity on the space provided below and These "penalty charges" consist of 15% attorney’s fees and 3. … petitioner [to] pay private respondents damages in the
return to us the duplicate copy. 15% liquidated damages which the bank imposes as penalty aggregate amount of P300,000.00 on the ground that the
Very truly yours, in cases of violation of the terms of the mortgage deed. The former acted in bad faith in the imposition upon them of the
BPI FAMILY BANK total redemption price thus should only be ₱12,592,435.72 aforestated penalty charges, when in truth it is entitled
BY: and the bank should return the amount of ₱3,111,813.40 thereto as the law and the contract expressly provide and that
(SGD.) LOLITA C. CARRIDO representing attorney’s fees and liquidated damages. The private respondents agreed to pay the same.12
Manager appellate court further stated that the mortgagors cannot be
CONFORME: deemed estopped to question the propriety of the charges On the correct computation of the redemption price, Section
ORIENT DEVELOPMENT BANKING CORPORATION because from the very start they had repeatedly questioned 78 of Republic Act No. 337, otherwise known as the General
(SGD.) AIDA C. DELA ROSA the imposition of attorney’s fees and liquidated damages and Banking Act, governs in cases where the mortgagee is a
Senior Vice President were merely constrained to pay the demanded redemption bank.13 Said provision reads:
9 of 15
SEC. 78. x x x In the event of foreclosure, whether judicially Agreement, the Borrower/Mortgagor shall pay an amount documentary stamp tax must be paid before title to the
or extrajudicially, of any mortgage on real estate which is equivalent to fifteen (15%) percent of the total amount property can be consolidated in favor of the bank.18
security for any loan granted before the passage of this Act claimed by the Bank, which in no case shall be less than Under Section 63 of Presidential Decree No. 1529 otherwise
or under the provisions of this Act, the mortgagor or debtor P2,000.00, Philippine currency, plus costs, collection known as the Property Registration Decree, if no right of
whose real property has been sold at public auction, expenses and disbursements allowed by law, all of which redemption exists, the certificate of title of the mortgagor
judicially or extrajudicially, for the full or partial payment of shall be secured by this mortgage.15 shall be cancelled, and a new certificate issued in the name
an obligation to any bank, banking or credit institution,
of the purchaser. But where the right of redemption exists,
within the purview of this Act shall have the right, within Additionally, the Disclosure Statement on Loan/Credit the certificate of title of the mortgagor shall not be cancelled,
one year after the sale of the real estate as a result of the Transaction16 also duly signed by the petitioners-mortgagors but the certificate of sale and the order confirming the sale
foreclosure of the respective mortgage, to redeem the provides: shall be registered by brief memorandum thereof made by
property by paying the amount fixed by the court in the order
the Register of Deeds upon the certificate of title. In the
of execution, or the amount due under the mortgage deed, as 10. ADDITIONAL CHARGES IN CASE CERTAIN event the property is redeemed, the certificate or deed of
the case may be, with interest thereon at the rate specified in STIPULATIONS ARE NOT MET BY THE BORROWER redemption shall be filed with the Register of Deeds, and a
the mortgage, and all the costs, and judicial and other
brief memorandum thereof shall be made by the Register of
expenses incurred by the bank or institution concerned by a. Post Default Penalty 3.00% per month Deeds on the certificate of title.
reason of the execution and sale and as a result of the custody
of said property less the income received from the property. b. Attorney’s Services 15% of sum due but not less than It is therefore clear that in foreclosure sale, there is no actual
x x x x (Emphasis supplied.) P2,000.00 transfer of the mortgaged real property until after the
expiration of the one-year redemption period as provided in
Under the Mortgage Loan Agreement,14 petitioners-
c. Liquidated Damages 15% of sum due but not less than Act No. 3135 and title thereto is consolidated in the name of
mortgagors undertook to pay the attorney’s fees and the
P10,000.00 the mortgagee in case of non-redemption. In the interim, the
costs of registration and foreclosure. The following contract
mortgagor is given the option whether or not to redeem the
terms would show that the said items are separate and d. Collection & Legal Cost As provided by the Rules of real property. The issuance of the Certificate of Sale does not
distinct from the bid price which represents only the
Court by itself transfer ownership.19
outstanding loan balance with stipulated interest thereon.
e. Others (Specify) RR No. 4-99 issued on March 16, 1999, further amends
23. Application of Proceeds of Foreclosure Sale. The
RMO No. 6-92 relative to the payment of Capital Gains Tax
proceeds of sale of the mortgaged property/ies shall be
As correctly found by the trial court, that attorney’s fees and and Documentary Stamp Tax on extrajudicial foreclosure
applied as follows:
liquidated damages were not yet included in the bid price of sale of capital assets initiated by banks, finance and
a) To the payment of the expenses and cost of foreclosure ₱10,372,711.35 is clearly shown by the Statement of insurance companies.
and sale, including the attorney’s fees as herein provided; Account as of April 4, 1997 prepared by the petitioner bank SEC. 3. CAPITAL GAINS TAX. –
and given to petitioners-mortgagors. On the other hand, par. (1) In case the mortgagor exercises his right of redemption
b) To the satisfaction of all interest and charges accruing 23 of the Mortgage Loan Agreement indicated that asset within one year from the issuance of the certificate of sale,
upon the obligations herein and hereby secured. acquired expenses were to be added to the redemption price no capital gains tax shall be imposed because no capital
as part of "costs and other expenses incurred" by the gains has been derived by the mortgagor and no sale or
c) To the satisfaction of the principal amount of the mortgagee bank in connection with the foreclosure sale. transfer of real property was realized. x x x
obligations herein and hereby secured.
Coming now to the issue of capital gains tax, we find merit
(2) In case of non-redemption, the capital gains [tax] on the
d) To the satisfaction of all other obligations then owed by in petitioners-mortgagors’ argument that there is no legal
foreclosure sale imposed under Secs. 24(D)(1) and 27(D)(5)
the Borrower/Mortgagor to the Bank or any of its basis for the inclusion of this charge in the redemption price.
Under Revenue Regulations (RR) No. 13-85 (December 12, of the Tax Code of 1997 shall become due based on the bid
subsidiaries/affiliates such as, but not limited to BPI Credit
1985), every sale or exchange or other disposition of real price of the highest bidder but only upon the expiration of
Corporation; or to Bank of the Philippine Islands or any of
property classified as capital asset under Section 34(a)17 of the one-year period of redemption provided for under Sec. 6
its subsidiaries/affiliates such as, but not limited to BPI
the Tax Code shall be subject to the final capital gains tax. of Act No. 3135, as amended by Act No. 4118, and shall be
Leasing Corporation, BPI Express Card Corporation, BPI
The term sale includes pacto de retro and other forms of paid within thirty (30) days from the expiration of the said
Securities Corporation and BPI Agricultural Development
conditional sale. Section 2.2 of Revenue Memorandum one-year redemption period.
Bank; and Order (RMO) No. 29-86 (as amended by RMO No. 16-88
and as further amended by RMO Nos. 27-89 and 6-92) states SEC. 4. DOCUMENTARY STAMP TAX. –
e) The balance, if any, to be due to the Borrower/Mortgagor.
that these conditional sales "necessarily include mortgage (1) In case the mortgagor exercises his right of redemption,
xxxx foreclosure sales (judicial and extrajudicial foreclosure the transaction shall only be subject to the P15.00
sales)." Further, for real property foreclosed by a bank on or documentary stamp tax imposed under Sec. 188 of the Tax
31. Attorney’s Fees: In case the Bank should engage the after September 3, 1986, the capital gains tax and Code of 1997 because no land or realty was sold or
services of counsel to enforce its rights under this transferred for a consideration.
10 of 15
(2) In case of non-redemption, the corresponding mortgagors to the foreclosing bank. Hence, the inclusion of
documentary stamp tax shall be levied, collected and paid by the said charge in the total redemption price was
the person making, signing, issuing, accepting, or unwarranted and the corresponding amount paid by the
transferring the real property wherever the document is petitioners-mortgagors should be returned to them.
made, signed, issued, accepted or transferred where the
property is situated in the Philippines. x x x (Emphasis WHEREFORE, premises considered, both petitions are
supplied.) PARTLY GRANTED.
In G.R. No. 165617, BPI Family Savings Bank, Inc. is
Although the subject foreclosure sale and redemption took hereby ordered to RETURN the amounts representing
place before the effectivity of RR No. 4-99, its provisions capital gains and documentary stamp taxes as reflected in the
may be given retroactive effect in this case. Statement of Account To Redeem as of April 7, 1997, to
petitioners Supreme Transliner, Inc., Moises C. Alvarez and
Section 246 of the NIRC of 1997 states: Paulita Alvarez, and to retain only the sum provided in RR
No. 4-99 as documentary stamps tax due on the foreclosure
SEC. 246. Non-Retroactivity of Rulings. – Any revocation, sale.1awphi1
modification, or reversal of any of the rules and regulations In G.R. No. 165837, petitioner BPI Family Savings Bank,
promulgated in accordance with the preceding Sections or Inc. is hereby declared entitled to the attorney’s fees and
any of the rulings or circulars promulgated by the liquidated damages included in the total redemption price
Commissioner shall not be given retroactive application if paid by Supreme Transliner, Inc., Moises C. Alvarez and
the revocation, modification, or reversal will be prejudicial Paulita Alvarez. The sums awarded as moral and exemplary
to the taxpayers, except in the following cases: damages, attorney’s fees and costs in favor of Supreme
Transliner, Inc., Moises C. Alvarez and Paulita Alvarez are
(a) where the taxpayer deliberately misstates or omits DELETED.
material facts from his return or in any document required of
The Decision dated April 6, 2004 of the Court of Appeals in
him by the Bureau of Internal Revenue;
CA-G.R. CV No. 74761 is accordingly MODIFIED.
(b) where the facts subsequently gathered by the Bureau of SO ORDERED.
SECOND DIVISION
Internal Revenue are materially different from the facts on
which the ruling is based; or

(c) where the taxpayer acted in bad faith.

In this case, the retroactive application of RR No. 4-99 is

more consistent with the policy of aiding the exercise of the
right of redemption. As the Court of Tax Appeals concluded
in one case, RR No. 4-99 "has curbed the inequity of
imposing a capital gains tax even before the expiration of the
redemption period [since] there is yet no transfer of title and
no profit or gain is realized by the mortgagor at the time of
foreclosure sale but only upon expiration of the redemption
period."20 In his commentaries, De Leon expressed the view
that while revenue regulations as a general rule have no
retroactive effect, if the revocation is due to the fact that the
regulation is erroneous or contrary to law, such revocation
shall have retroactive operation as to affect past transactions,
because a wrong construction of the law cannot give rise to
a vested right that can be invoked by a taxpayer.21
Considering that herein petitioners-mortgagors exercised
their right of redemption before the expiration of the
statutory one-year period, petitioner bank is not liable to pay
the capital gains tax due on the extrajudicial foreclosure sale.
There was no actual transfer of title from the owners-
11 of 15
G.R. No. 102967 February 10, 2000 from sale of the property held by the taxpayer beyond twelve
BIBIANO V. BAÑAS, JR., petitioner, Selling Price of Land P2,308,770.00 months pursuant to Section 345 of the 1977 National Internal
vs. COURT OF APPEALS, AQUILINO T. LARIN, Revenue Code (NIRC). The deficiency tax assessment was
RODOLFO TUAZON AND PROCOPIO Less Initial Payment 461,754.00 3 reduced to nine hundred thirty six thousand, five hundred
TALON, respondents. ninety-eight pesos and fifty centavos (P936,598.50),
QUISUMBING, J.: inclusive of surcharges and penalties for the year 1976.
For review is the Decision of the Court of Appeals in CA- Unrealized Gain P1,847,016.00 On June 27, 1980, respondent Larin sent a letter to petitioner
C.R. CV No. 17251 promulgated on November 29, 1991. It
informing of the income tax deficiency that must be settled
affirmed in toto the judgment of the Regional Trial Court
him immediately.
(RTC), Branch 39, Manila, in Civil Case No. 82-12107. Said
judgment disposed as follows: 1976 Declaration of Income on Disposition of Capital Asset On September 26, 1980, petitioner acknowledged receipt of
FOR ALL THE FOREGOING CONSIDERATIONS, this subject to Tax: the letter but insisted that the sale of his land to AYALA was
Court hereby renders judgment DISMISSING the complaint on installment.
Initial Payment P461,754.00
against all the defendants and ordering plaintiff [herein On June 8, 1981, the matter was endorsed to the Acting
petitioner] to pay defendant Larin the amount of Less: Cost of land and other incidental Chief of the Legal Branch of the National Office of the BIR.
P200,000.00 (Two Hundred Thousand Pesos) as actual and ( 76,547.90) The Chief of the Tax Fraud Unit recommended the
Expenses
compensatory damages; P200,000.00 as moral damages; and prosecution of a criminal case for conspiring to file false and
P50,000.00 as exemplary damages and attorneys fees of fraudulent returns, in violation of Section 51 of the Tax Code
P100,000.00.1 Income P385,206.10 against petitioner and his accountants, Andres P. Alejandre
and Conrado Bañas.
The facts, which we find supported by the records, have been
On June 17, 1981, Larin filed a criminal complaint for tax
summarized by the Court of Appeals as follows: Income subject to tax (P385,206. 10 x 50%) P192,603.65
evasion against the petitioner.
On February 20, 1976, petitioner, Bibiano V. Bañas Jr. sold
On July 1, 1981, news items appeared in the now defunct
to Ayala Investment Corporation (AYALA), 128,265 square
Evening Express with the headline: "BIR Charges Realtor"
meters of land located at Bayanan, Muntinlupa, for two
and another in the defunct Evening Post with a news item:
million, three hundred eight thousand, seven hundred In the succeeding years, until 1979, petitioner reported a
"BIR raps Realtor, 2 accountants." Another news item also
seventy (P2,308,770.00) pesos. The Deed of Sale provided uniform income of two hundred thirty thousand, eight
appeared in the July 2, 1981, issue of the Bulletin Today
that upon the signing of the contract AYALA shall pay four hundred seventy-seven (P230,877.00) pesos4 as gain from
entitled: "3-face P1-M tax evasion raps." All news items
hundred sixty-one thousand, seven hundred fifty-four sale of capital asset. In his 1980 income tax amnesty return,
mentioned petitioner's false income tax return concerning
(P461,754.00) pesos. The balance of one million, eight petitioner also reported the same amount of P230,877.00 as
the sale of land to AYALA.
hundred forty-seven thousand and sixteen (P1,847,016.00) the realized gain on disposition of capital asset for the year.
pesos was to be paid in four equal consecutive annual On July 2, 1981, petitioner filed an Amnesty Tax Return
On April 11, 1978, then Revenue Director Mauro Calaguio
installments, with twelve (12%) percent interest per under P.D. 1740 and paid the amount of forty-one thousand,
authorized tax examiners, Rodolfo Tuazon and Procopio
annum on the outstanding balance. AYALA issued one seven hundred twenty-nine pesos and eighty-one centavos
Talon to examine the books and records of petitioner for the
promissory note covering four equal annual installments. (P41,729.81). On November 2, 1981, petitioner again filed
year 1976. They discovered that petitioner had no
Each periodic payment of P461,754.00 pesos shall be an Amnesty Tax Return under P.D. 1840 and paid an
outstanding receivable from the 1976 land sale to AYALA
payable starting on February 20, 1977, and every year additional amount of one thousand, five hundred twenty-five
and concluded that the sale was cash and the entire profit
thereafter, or until February 20, 1980. pesos and sixty-two centavos (P1,525.62). In both, petitioner
should have been taxable in 1976 since the income was
did not recognize that his sale of land to AYALA was on
The same day, petitioner discounted the promissory note wholly derived in 1976.
cash basis.
with AYALA, for its face value of P1,847,016.00, evidenced
Tuazon and Talon filed their audit report and declared a
by a Deed of Assignment signed by the petitioner and Reacting to the complaint for tax evasion and the news
discrepancy of two million, ninety-five thousand, nine
AYALA. AYALA issued nine (9) checks to petitioner, all reports, petitioner filed with the RTC of Manila an
hundred fifteen (P2,095,915.00) pesos in petitioner's 1976
dated February 20, 1976, drawn against Bank of the action6 for damages against respondents Larin, Tuazon and
net income. They recommended deficiency tax assessment
Philippine Islands with the uniform amount of two hundred Talon for extortion and malicious publication of the BIR's
for two million, four hundred seventy-three thousand, six
five thousand, two hundred twenty-four (P205,224.00) tax audit report. He claimed that the filing of criminal
hundred seventy-three (P2,473,673.00) pesos.
pesos. complaints against him for violation of tax laws were
Meantime, Aquilino Larin succeeded Calaguio as Regional improper because he had already availed of two tax amnesty
In his 1976 Income Tax Return, petitioner reported the
Director of Manila Region IV-A. After reviewing the decrees, Presidential Decree Nos. 1740 and 1840.
P461,754 initial payment as income from disposition of
examiners' report, Larin directed the revision of the audit
capital asset.2 The trial court decided in favor of the respondents and
report, with instruction to consider the land as capital asset.
awarded Larin damages, as already stated. Petitioner
The tax due was only fifty (50%) percent of the total gain
seasonably appealed to the Court of Appeals. In its decision
12 of 15
of November 29, 1991, the respondent court affirmed the 2. Whether respondent court erred in holding that P.D. 1740 declare therein the true and correct income, deductions and
trial court's decision, thus: and 1840 granting tax amnesties did not grant immunity exemptions and pay the income tax due per return. Likewise,
The finding of the court a quo that plaintiff-appellant's from tax suits; any individual who filed a false or fraudulent return for any
actions against defendant-appellee Larin were unwarranted taxable year in the period mentioned above may amend his
and baseless and as a result thereof, defendant-appellee 3. Whether respondent court erred in finding that petitioner's return and pay the correct amount of tax due after deducting
Larin was subjected to unnecessary anxiety and humiliation income from the sale of land in 1976 should be declared as the taxes already paid, if any, in the original declaration.
is therefore supported by the evidence on a cash transaction in his tax return for the same year (because (emphasis ours)
record.1âwphi1.nêt the buyer discounted the promissory note issued to the seller xxx xxx xxx
on future installment payments of the sale, on the same day Sec. 5. Immunity from Penalties. — Any individual who
Defendant-appellee Larin acted only in pursuance of the of the sale); voluntarily files a return under this Decree and pays the
authority granted to him. In fact, the criminal charges filed
income tax due thereon shall be immune from the penalties,
against him in the Tanodbayan and in the City Fiscal's Office 4. Whether respondent court erred and committed grave
civil or criminal, under the National Internal Revenue Code
were all dismissed. abuse of discretion in awarding damages to respondent
arising from failure to pay the correct income tax with
Larin.
WHEREFORE, the appealed judgment is hereby respect to the taxable years from which an amended return
AFFIRMED in toto.7 The first issue, on whether the Court of Appeals erred in was filed or for which an original return was filed in cases
finding that there was no extortion, involves a determination where no return has been filed for any of the taxable years
Hence this petition, wherein petitioner raises before us the of fact. The Court of Appeals observed, 1974 to 1979: Provided, however, That these immunities
following queries: The only evidence to establish the alleged extortion attempt shall not apply in cases where the amount of net taxable
by defendants-appellees is the plaintiff-appellant's self income declared under this Decree is understated to the
I. WHETHER THE COURT OF APPEALS ERRED IN ITS serving declarations. extent of 25% or more of the correct net taxable income.
INTERPRETATION OF PERTINENT TAX LAWS, THUS (emphasis ours)
IT FAILED TO APPRECIATE THE CORRECTNESS As found by the court a quo, "said attempt was known to
AND ACCURACY OF PETITIONER'S RETURN OF THE plaintiff-appellant's son-in-law and counsel on record, yet, P.D. NO. 1840 — GRANTING A TAX AMNESTY ON
INCOME DERIVED FROM THE SALE OF THE LAND said counsel did not take the witness stand to corroborate the UNTAXED INCOME AND/OR WEALTH EARNED OR
TO AYALA. testimony of plaintiff."8 ACQUIRED DURING THE TAXABLE YEARS 1974 TO
1980 AND REQUIRING THE FILING OF THE
II. WHETHER THE RESPONDENT COURT ERRED IN As repeatedly held, findings of fact by the Court of Appeals STATEMENT OF ASSETS, LIABILITIES, AND NET
NOT FINDING THAT THERE WAS AN ALLEGED especially if they affirm factual findings of the trial court will
WORTH.
ATTEMPT TO EXTORT [MONEY FROM] PETITIONER not be disturbed by this Court, unless these findings are not
BY PRIVATE RESPONDENTS. supported by evidence.9 Similarly, neither should we disturb Sec. 1. Coverage. — In case of voluntary disclosure of
a finding of the trial court and appellate court that an previously untaxed income and/or wealth such as earnings,
III. WHETHER THE RESPONDENT COURT ERRED IN allegation is not supported by evidence on record. Thus, we
receipts, gifts, bequests or any other acquisition from any
ITS INTERPRETATION OF PRESIDENTIAL DECREE agree with the conclusion of respondent court that herein
source whatsoever, realized here or abroad, by any
NOS. 1740 AND 1840, AMONG OTHERS, private respondents, on the basis of evidence, could not be
held liable for extortion. individual taxpayer, which are taxable under the National
PETITIONER'S IMMUNITY FROM CRIMINAL Internal Revenue Code, as amended, the assessment and
PROSECUTION. On the second issue of whether P.D. Nos. 1740 and 1840 collection of all internal revenue taxes, including the
which granted tax amnesties also granted immunity from increments or penalties on account of non-payment, as well
IV. WHETHER THE RESPONDENT COURT ERRED IN criminal prosecution against tax offenses, the pertinent
as all civil, criminal or administrative liabilities arising from
ITS INTERPRETATION OF WELL-ESTABLISHED sections of these laws state:
or incident thereto under the National Internal Revenue
DOCTRINES OF THIS HONORABLE COURT AS P.D. No. 1740. CONDONING PENALTIES FOR
Code, are hereby condoned provided that the individual
REGARDS THE AWARD OF ACTUAL, MORAL AND CERTAIN VIOLATIONS OF THE INCOME TAX LAW
taxpayer shall pay. (emphasis ours) . . .
EXEMPLARY DAMAGES IN FAVOR OF UPON VOLUNTARY DISCLOSURE OF UNDECLARED
RESPONDENT LARIN. INCOME FOR INCOME TAX PURPOSES AND Sec. 2. Conditions for Immunity. — The immunity granted
REQUIRING PERIODIC SUBMISSION OF NET WORTH under Section one of this Decree shall apply only under the
In essence, petitioner asks the Court to resolve seriatim the STATEMENT. following conditions:
following issues: xxx xxx xxx
Sec. 1. Voluntary Disclosure of Correct Taxable Income. — a) Such previously untaxed income and/or wealth must have
1. Whether respondent court erred in ruling that there was no
Any individual who, for any or all of the taxable years 1974 been earned or realized in any of the years 1974 to 1980;
extortion attempt by BIR officials;
to 1979, had failed to file a return is hereby, allowed to file
a return for each of the aforesaid taxable years and accurately
13 of 15
b) The taxpayer must file an amnesty return on or before On the third issue, petitioner asserts that his sale of the land (1) Sales of property on the installment plan, that is, sales in
November 30, 1981, and fully pay the tax due thereon; to AYALA was not on cash basis but on installment as which the payments received in cash or property other than
clearly specified in the Deed of Sale which states: evidences of indebtedness of the purchaser during the
c) The amnesty tax paid by the taxpayer under this Decree That for and in consideration of the sum of TWO MILLION taxable year in which the sale is made do not exceed 25 per
shall not be less than P1,000.00 per taxable year; and THREE HUNDRED EIGHT THOUSAND SEVEN cent of the selling price;
HUNDRED SEVENTY (P2,308,770.00) PESOS Philippine
d) The taxpayer must file a statement of assets, liabilities and Currency, to be paid as follows: (2) Deferred-payment sales not on the installment plan, that
net worth as of December 31, 1980, as required under is sales in which the payments received in cash or property
Section 6 hereof. (emphasis ours) 1. P461,754.00, upon the signing of the Deed of Sale; and, other than evidences of indebtedness of the purchaser during
the taxable year in which the sale is made exceed 25 per cent
It will be recalled that petitioner entered into a deed of sale 2. The balance of P1,847,016.00, to be paid in four (4) equal,
purportedly on installment. On the same day, he discounted of the selling price;
consecutive, annual installments with interest thereon at the
the promissory note covering the future installments. The rate of twelve percent (12%) per annum, beginning on In the sale of mortgaged property the amount of the
discounting seems questionable because ordinarily, when a February 20, 1976, said installments to be evidenced by four mortgage, whether the property is merely taken subject to
bill is discounted, the lender (e.g. banks, financial (4) negotiable promissory notes.12
institution) charges or deducts a certain percentage from the the mortgage or whether the mortgage is assumed by the
principal value as its compensation. Here, the discounting purchaser, shall be included as a part of the "selling price"
Petitioner resorts to Section 43 of the NIRC and Sec. 175 of
was done by the buyer. On July 2, 1981, two weeks after the but the amount of the mortgage, to the extent it does not
Revenue Regulation No. 2 to support his claim.
filing of the tax evasion complaint against him by respondent exceed the basis to the vendor of the property sold, shall not
Larin on June 17, 1981, petitioner availed of the tax amnesty Sec. 43 of the 1977 NIRC states, be considered as a part of the "initial payments" or of the
under P.D. No. 1740. His amended tax return for the years Installment basis. — (a) Dealers in personal property. — . . "total contract price," as those terms are used in section 43
1974 - 1979 was filed with the BIR office of Valenzuela, . of the Code, in sections 174 and 176 of these regulations,
Bulacan, instead of Manila where the petitioner's principal and in this section. The term "initial payments" does not
office was located. He again availed of the tax amnesty (b) Sales of realty and casual sales of personalty — In the
include amounts received by the vendor in the year of sale
under P.D. No. 1840. His disclosure, however, did not case (1) of a casual sale or other casual disposition of
from the disposition to a third person of notes given by the
include the income from his sale of land to AYALA on cash personal property (other than property of a kind which would
vendee as part of the purchase price which are due and
basis. Instead he insisted that such sale was on installment. properly be included in the inventory of the taxpayer if on
payable in subsequent years. Commissions and other selling
He did not amend his income tax return. He did not pay the hand at the close of the taxable year), for a price exceeding
tax which was considerably increased by the income derived expenses paid or incurred by the vendor are not to be
one thousand pesos, or (2) of a sale or other disposition of
from the discounting. He did not meet the twin requirements deducted or taken into account in determining the amount of
real property if in either case the initial payments do not
of P.D. 1740 and 1840, declaration of his untaxed income the "initial payments," the "total contract price," or the
exceed twenty-five percentum of the selling price, the
and full payment of tax due thereon. Clearly, the petitioner "selling price." The term "initial payments" contemplates at
income may, under regulations prescribed by the Minister of
is not entitled to the benefits of P.D. Nos. 1740 and 1840. least one other payment in addition to the initial payment. If
Finance, be returned on the basis and in the manner above
The mere filing of tax amnesty return under P.D. 1740 and the entire purchase price is to be paid in a lump sum in a later
prescribed in this section. As used in this section the term
1840 does not ipso facto shield him from immunity against year, there being no payment during the year, the income
"initial payment" means the payments received in cash or
prosecution. Tax amnesty is a general pardon to taxpayers may not be returned on the installment basis. Income may
who want to start a clean tax slate. It also gives the property other than evidences of indebtedness of the
not be returned on the installment basis where no payment
government a chance to collect uncollected tax from tax purchaser during the taxable period in which the sale or other
in cash or property, other than evidences of indebtedness of
evaders without having to go through the tedious process of disposition is made. . . . (emphasis ours)
the purchaser, is received during the first year, the purchaser
a tax case. To avail of a tax amnesty granted by the
Revenue Regulation No. 2, Section 175 provides, having promised to make two or more payments, in later
government, and to be immune from suit on its
years.
delinquencies, the tax payer must have voluntarily disclosed
Sale of real property involving deferred payments. — Under
his previously untaxed income and must have paid the Petitioner asserts that Sec. 43 allows him to return as income
section 43 deferred-payment sales of real property include
corresponding tax on such previously untaxed income.10 in the taxable years involved, the respective installments as
(1) agreements of purchase and sale which contemplate that
It also bears noting that a tax amnesty, much like a tax a conveyance is not to be made at the outset, but only after provided by the deed of sale between him and AYALA.
exemption, is never favored nor presumed in law and if all or a substantial portion of the selling price has been paid, Consequently, he religiously reported his yearly income
granted by statute, the terms of the amnesty like that of a tax from sale of capital asset, subject to tax, as follows:
and (b) sales in which there is an immediate transfer of title,
exemption must be construed strictly against the taxpayer Year 1977 (50% of P230,877.0
the vendor being protected by a mortgage or other lien as to
and liberally in favor of the taxing authority.11 Hence, on this P461,754) 0
deferred payments. Such sales either under (a) or (b), fall
matter, it is our view that petitioner's claim of immunity from
prosecution under the shield of availing tax amnesty is into two classes when considered with respect to the terms
untenable. of sale, as follows: 1978 230,877.00
14 of 15
to the computation of the initial payment. If the initial extortion cases filed against him hampered his immediate
1979 230,877.00 payment is within 25% of total contract price, exclusive of promotion, caused him strong anxiety and social
the proceeds of discounted notes, the sale qualifies as an humiliation. The trial court awarded him two hundred
installment sale, otherwise it is a deferred sale.15 thousand (P200,000,00) pesos as actual damages. However,
1980 230,877.00
the appellate court stated that, despite pendency of this case,
Although the proceed of a discounted promissory note is not
Larin was given a promotion at the BIR. Said respondent
considered part of the initial payment, it is still taxable
court:
income for the year it was converted into cash. The
Petitioner says that his tax declarations are acceptable modes We find nothing on record, aside from defendant-appellee
subsequent payments or liquidation of certificates of
of payment under Section 175 of the Revenue Regulations indebtedness is reported using the installment method in Larin's statements (TSN, pp. 6-7, 11 December 1985), to
(RR) No. 2. The term "initial payment", he argues, does not computing the proportionate income16 to be returned, during show that he suffered loss of seniority that allegedly barred
include amounts received by the vendor which are part of the the respective year it was realized. Non-dealer sales of real his promotion. In fact, he was promoted to his present
complete purchase price, still due and payable in subsequent or personal property may be reported as income under the position despite the pendency of the instant case (TSN, pp.
years. Thus, the proceeds of the promissory notes, not yet installment method provided that the obligation is still 35-39, 04 November 1985).23”
due which he discounted to AYALA should not be included outstanding at the close of that year. If the seller disposes the
as income realized in 1976. Petitioner states that the original entire installment obligation by discounting the bill or the Moreover, the records of the case contain no statement
agreement in the Deed of Sale should not be affected by the promissory note, he necessarily must report the balance of whatsoever of the amount of the actual damages sustained
subsequent discounting of the bill. the income from the discounting not only income from the by the respondents. Actual damages cannot be allowed
initial installment payment. unless supported by evidence on the record.24 The court
On the other hand, respondents assert that taxation is a cannot rely on speculation, conjectures or guesswork as to
matter of substance and not of form. Returns are scrutinized Where an installment obligation is discounted at a bank or the fact and amount of damages.25 To justify a grant of actual
to determine if transactions are what they are and not finance company, a taxable disposition results, even if the or compensatory damages, it is necessary to prove with a
declared to evade taxes. Considering the progressive nature seller guarantees its payment, continues to collect on the reasonable degree of certainty, the actual amount of
of our income taxation, when income is spread over several installment obligation, or handles repossession of loss.26 Since we have no basis with which to assess, with
installment payments through the years, the taxable income merchandise in case of default.17 This rule prevails in the certainty, the actual or compensatory damages counter-
goes down and the tax due correspondingly decreases. When United States.18 Since our income tax laws are of American claimed by respondent Larin, the award of such damages
payment is in lump sum the tax for the year proportionately origin,19 interpretations by American courts an our parallel should be deleted.
increases. Ultimately, a declaration that a sale is on tax laws have persuasive effect on the interpretation of these
installment diminishes government taxes for the year of laws.20 Thus, by analogy, all the more would a taxable Moral damages may be recovered in cases involving acts
initial installment as against a declaration of cash sale where disposition result when the discounting of the promissory referred to in Article 2127 of the Civil Code.28 As a rule, a
taxes to the government is larger. note is done by the seller himself. Clearly, the indebtedness public official may not recover damages for charges of
of the buyer is discharged, while the seller acquires money falsehood related to his official conduct unless he proves that
As a general rule, the whole profit accruing from a sale of the statement was made with actual malice.
property is taxable as income in the year the sale is made. for the settlement of his receivables. Logically then, the
income should be reported at the time of the actual gain. For In Babst, et. al. vs. National Intelligence Board, et. al., 132
But, if not all of the sale price is received during such year, SCRA 316, 330 (1984), we reiterated the test for actual
and a statute provides that income shall be taxable in the year income tax purposes, income is an actual gain or an actual
increase of wealth.21 Although the proceeds of a discounted malice as set forth in the landmark American case of New
in which it is "received," the profit from an installment sale York Times vs. Sullivan,29 which we have long adopted, in
is to be apportioned between or among the years in which promissory note is not considered initial payment, still it
must be included as taxable income on the year it was defamation and libel cases, viz.:
such installments are paid and received.13 . . . with knowledge that it was false or with reckless
converted to cash. When petitioner had the promissory notes
Sec. 43 and Sec. 175 says that among the entities who may covering the succeeding installment payments of the land disregard of whether it was false or not.
use the above-mentioned installment method is a seller of issued by AYALA, discounted by AYALA itself, on the
real property who disposes his property on installment, same day of the sale, he lost entitlement to report the sale as We appreciate petitioner's claim that he filed his 1976 return
provided that the initial payment does not exceed 25% of the a sale on installment since, a taxable disposition resulted and in good faith and that he had honestly believed that the law
selling price. They also state what may be regarded as petitioner was required by law to report in his returns the allowed him to declare the sale of the land, in installment.
installment payment and what constitutes initial payment. income derived from the discounting. What petitioner did is We can further grant that the pertinent tax laws needed
Initial payment means the payment received in cash or tantamount to an attempt to circumvent the rule on payment construction, as we have earlier done. That petitioner was
property excluding evidences of indebtedness due and of income taxes gained from the sale of the land to AYALA offended by the headlines alluding to him as tax evader is
payable in subsequent years, like promissory notes or for the year 1976. also fully understandable. All these, however, do not justify
mortgages, given of the purchaser during the taxable year of what amounted to a baseless prosecution of respondent
sale. Initial payment does not include amounts received by Lastly, petitioner questions the damages awarded to Larin. Petitioner presented no evidence to prove Larin
the vendor in the year of sale from the disposition to a third respondent Larin. extorted money from him. He even admitted that he never
person of notes given by the vendee as part of the purchase Any person who seeks to be awarded actual or compensatory met nor talked to respondent Larin. When the tax
price which are due and payable in subsequent years.14 Such damages due to acts of another has the burden of proving investigation against the petitioner started, Larin was not yet
disposition or discounting of receivable is material only as said damages as well as the amount thereof.22 Larin says the the Regional Director of BIR Region IV-A, Manila. On
15 of 15
respondent Larin's instruction, petitioner's tax assessment ruled that they should be reduced to more reasonable
was considered one involving a sale of capital asset, the amounts. . . . . (Emphasis ours.)
income from which was subjected to only fifty percent
(50%) assessment, thus reducing the original tax assessment In other words, the moral damages awarded must be
by half. These circumstances may be taken to show that commensurate with the loss or injury suffered.
Larin's involvement in extortion was not indubitable. Yet,
petitioner went on to file the extortion cases against Larin in In the same case (PNB v. CA), this Court found the amount
different fora. This is where actual malice could attach on of exemplary damages required to be paid (P1,000,000,00)
petitioner's part. Significantly, the trial court did not err in "too excessive" and reduced it to an "equitable level"
dismissing petitioner's complaints, a ruling affirmed by the (P25,000.00).
Court of Appeals.
It will be noted that in above cases, the parties who were
Keeping all these in mind, we are constrained to agree that
awarded moral damages were not public officials.
there is sufficient basis for the award of moral and exemplary
Considering that here, the award is in favor of a government
damages in favor of respondent Larin. The appellate court
official in connection with his official function, it is with
believed respondent Larin when he said he suffered anxiety
caution that we affirm granting moral damages, for it might
and humiliation because of the unfounded charges against
open the floodgates for government officials counter-
him. Petitioner's actions against Larin were found
claiming damages in suits filed against them in connection
"unwarranted and baseless," and the criminal charges filed
with their functions. Moreover, we must be careful lest the
against him in the Tanodbayan and City Fiscal's Office were
amounts awarded make citizens hesitate to expose
all dismissed.30 Hence, there is adequate support for
corruption in the government, for fear of lawsuits from
respondent court's conclusion that moral damages have been
vindictive government officials. Thus, conformably with our
proved.
declaration that moral damages are not intended to enrich
Now, however, what would be a fair amount to be paid as anyone,33 we hereby reduce the moral damages award in this
compensation for moral damages also requires case from two hundred thousand (P200,000.00) pesos to
determination. Each case must be governed by its own seventy five thousand (P75,000.00) pesos, while the
peculiar circumstances.31 On this score, Del Rosario exemplary damage is set at P25,000.00 only.
vs. Court of Appeals,32 cites several cases where no actual
The law allows the award of attorney's fees when exemplary
damages were adjudicated, and where moral and exemplary
damages are awarded, and when the party to a suit was
damages were reduced for being "too excessive," thus:
compelled to incur expenses to protect his interest.34 Though
In the case of PNB v. C.A., [256 SCRA 309 (1996)], this
government officers are usually represented by the Solicitor
Court quoted with approval the following observation General in cases connected with the performance of official
from RCPI v. Rodriguez, viz: functions, considering the nature of the charges, herein
respondent Larin was compelled to hire a private lawyer for
** **. Nevertheless, we find the award of P100,000.00 as
the conduct of his defense as well as the successful pursuit
moral damages in favor of respondent Rodriguez excessive of his counterclaims. In our view, given the circumstances
and unconscionable. In the case of Prudenciado v. Alliance of this case, there is ample ground to award in his favor
Transport System, Inc. (148 SCRA 440 [1987]) we said: . . . P50,000,00 as reasonable attorney's fees.
[I]t is undisputed that the trial courts are given discretion to
WHEREFORE, the assailed decision of the Court of
determine the amount of moral damages (Alcantara v. Surro,
Appeals dated November 29, 1991, is hereby AFFIRMED
93 Phil. 472) and that the Court of Appeals can only modify
with MODIFICATION so that the award of actual damages
or change the amount awarded when they are palpably and are deleted; and that petitioner is hereby ORDERED to pay
scandalously excessive "so as to indicate that it was the result to respondent Larin moral damages in the amount of
of passion, prejudice or corruption on the part of the trial P75,000.00, exemplary damages in the amount of
court" (Gellada v. Warner Barnes & Co., Inc., 57 O.G. [4] P25,000.00, and attorney's fees in the amount of P50,000.00
7347, 7358; Sadie v. Bacharach Motors Co., Inc., 57 O.G. only.1âwphi1.nêt
[4] 636 and Adone v. Bacharach Motor Co., Inc., 57 O.G.
No pronouncement as to costs.
656). But in more recent cases where the awards of moral
and exemplary damages are far too excessive compared to SO ORDERED.
the actual loses sustained by the aggrieved party, this Court