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Thursday, December 20, 2012

SPOUSES PARAY vs RODRIGUEZ Case Digest
G.R. No. 132287, January 24, 2006 SPOUSES BONIFACIO and FAUSTINA PARAY, and VIDAL ESPELETA, Petitioners, vs. DRA. ABDULIA C. RODRIGUEZ, MIGUELA R. JARIOL assisted by her husband ANTOLIN JARIOL, SR., LEONORA NOLASCO assisted by her husband FELICIANO NOLASCO, DOLORES SOBERANO assisted by her husband JOSE SOBERANO, JR., JULIA R. GENEROSO, TERESITA R. NATIVIDAD and GENOVEVA R. SORONIO assisted by her husband ALFONSO SORONIO, Respondents. Facts: Respondents were the owners, in their respective personal capacities, of shares of stock in a corporation known as the Quirino-Leonor-Rodriguez Realty Inc.Respondents secured by way of pledge of some of their shares of stock to petitioners Bonifacio and Faustina Paray (Parays) the payment of certain loan obligations. When the Parays attempted to foreclose the pledges on account of respondents failure to pay their loans, respondents filed complaints which sought the declaration of nullity of the pledge agreements. Respondents consign to RTC which they interpreted as redemption. Notwithstanding the consignations, the public auction took place as scheduled, with petitioner Vidal Espeleta successfully bidding the amount of P6,200,000.00 for all of the pledged shares. Issue: WON Petitioners were authorized to refuse as they did the tender of payment since they were undertaking the auction sale pursuant to the final and executory decision in Civil Cases. Held: Yes. it must be clarified that the subject sale of pledged shares was an extrajudicial sale, specifically a notarial sale, as distinguished from a judicial sale as typified by an execution sale. Under the Civil Code, the foreclosure of a pledge occurs extrajudicially, without intervention by the courts. All the creditor needs to do, if the credit has not been

satisfied in due time, is to proceed before a Notary Public to the sale of the thing pledged. In this case, petitioners attempted as early as 1980 to proceed extrajudicially with the sale of the pledged shares by public auction. However, extrajudicial sale was stayed with the filing of Civil Cases No. R-20120 and 20131, which sought to annul the pledge contracts. The final and executory judgment in those cases affirmed the pledge contracts and disposed. Since the pledged shares in this case are not subject to redemption, the Court of Appeals had no business invoking and applying the inexistent right of redemption. We cannot thus agree that the consigned payments should be treated with liberality, or somehow construed as having been made in the exercise of the right of redemption. We also must reject the appellate courts declaration that the buyer of at the public auction is not ipso facto rendered the owner of the auctioned shares, since the debtor enjoys the one-year redemptive period to redeem the property. Obviously, since there is no right to redeem personal property, the rights of ownership vested unto the purchaser at the foreclosure sale are not entangled in any suspensive condition that is implicit in a redemptive period. WHEREFORE, the petition is GRANTED. The assailed decision of the Court of Appeals is SET ASIDE and the decision of the Cebu City RTC, Branch 16, dated 18 November 1992 is REINSTATED. Costs against respondents.

Thursday, December 20, 2012

FORT BONIFACIO DEVELOPMENT CORPORATION vs YLLAS LENDING CORPORATION Case Digest
G.R. No. 158997, October 6, 2008 FORT BONIFACIO DEVELOPMENT CORPORATION, Petitioner vs. YLLAS LENDING CORPORATION and JOSE S. LAURAYA, in his official capacity as President, Respondents. Facts: FBDC executed a lease contract in favor of Tirreno, Inc. Section 22, of the lease contract, reads: Section 22. Lien on the Properties of the Lessee Upon the termination of this Contract or the expiration of the Lease Period without the rentals, charges and/or damages, if any, being fully paid or settled, the LESSOR shall have the right to retain possession of the properties of the LESSEE used or situated in

the Leased Premises and the LESSEE hereby authorizes the LESSOR to offset the prevailing value thereof as appraised by the LESSOR against any unpaid rentals, charges and/or damages. If the LESSOR does not want to use said properties, it may instead sell the same to third parties and apply the proceeds thereof against any unpaid rentals, charges and/or damages. Tirreno began to default in its lease payments in 1999. By July 2000, Tirreno was already in arrears by P5,027,337.91. FBDC entered and occupied the leased premises. FBDC also appropriated the equipment and properties left by Tirreno pursuant to Section 22 of their Contract of Lease as partial payment for Tirrenos outstanding obligations. Issue: WON the stipulation of the contract of lease partakes of a pledge which is void under Article 2088 of the Civil Code for being pactum commissorium. Held: No. Section 22, as worded, gives FBDC a means to collect payment from Tirreno in case of termination of the lease contract or the expiration of the lease period and there are unpaid rentals, charges, or damages. The existence of a contract of pledge, however, does not arise just because FBDC has means of collecting past due rent from Tirreno other than direct payment. The trial court concluded that Section 22 constitutes a pledge because of the presence of the first three requisites of a pledge: Tirrenos properties in the leased premises secure Tirrenos lease payments; Tirreno is the absolute owner of the said properties; and the persons representing Tirreno have legal authority to constitute the pledge. However, the fourth requisite, that the thing pledged is placed in the possession of the creditor, is absent. There is non-compliance with the fourth requisite even if Tirrenos personal properties are found in FBDCs real property. Tirrenos personal properties are in FBDCs real property because of the Contract of Lease, which gives Tirreno possession of the personal properties. Since Section 22 is not a contract of pledge, there is no pactumcommissorium. WHEREFORE, we GRANT the petition. We SET ASIDE the Orders dated 7 March 2003 and 3 July 2003 of Branch 59 of the Regional Trial Court of Makati City in Civil Case No. 01-1452 dismissing Fort Bonifacio Development Corporations Third Party Claim and denying Fort Bonifacio Development Corporations Motion to Intervene and Admit Complaint in Intervention. WeREINSTATE Fort Bonifacio Development Corporations Third Party Claim and GRANT its Motion to Intervene and Admit Complaint in Intervention. Fort Bonifacio Development Corporation may hold the Sheriff liable for the seizure and delivery of the properties subject of this case because of the lack of an indemnity bond.

FIRST PLANTERS PAWNSHOP VS. CIR G.R. No. 174134

July 30, 2008 FACTS: In a Pre-assessment Notice, petitioner was informed by the BIR that it has an existing tax deficiency on its VAT and Documentary Stamp Tax (DST) liabilities for the year 2000. Petitioner protested the assessment for lack of legal and factual bases. Petitioner subsequently received a Formal Assessment Notice, directing payment of VAT deficiency and DST deficiency, inclusive of surcharge and interest. Petitioner filed a protest, which was denied by the Acting Regional Director. Petitioner then filed a petition for review with the CTA, which upheld the deficiency assessment. Petitioner filed an MR which was denied. Petitioner appealed to the CTA En Banc which denied the Petition for Review. Petitioner sought reconsideration but this was denied by the CTA.. Hence, the present petition for review under Rule 45 of the ROC. The core of petitioners argument is that it is not a lending investor within the purview of Section 108(A) of the NIRC, as amended, and therefore not subject to VAT. Petitioner also contends that a pawn ticket is not subject to DST because it is not proof of the pledge transaction, and even assuming that it is so, still, it is not subject to tax since a DST is levied on the document issued and not on the transaction. ISSUE: is petitioner in this case liable for: 1. VAT 2. DST HELD: 1. NO The determination of petitioners tax liability depends on the tax treatment of a pawnshop business. It was the CTAs view that the services rendered by pawnshops fall under the general definition of sale or exchange of services under Section 108(A) of the Tax Code of 1997. The Court finds that pawnshops should have been treated as non-bank financial intermediaries from the very beginning, subject to the appropriate taxes provided by law. At the time of the disputed assessment, that is, for the year 2000, pawnshops were not subject to 10% VAT under the general provision on sale or exchange of services as defined under Section 108(A) of the Tax Code of 1997. Instead, due to the specific nature of its business, pawnshops were then subject to 10% VAT under the category of non-bank financial intermediaries, as provided in the same Section 108(A), which reads: SEC. 108. Value-added Tax on Sale of Services and Use or Lease of Properties. -

(A) xx The phrase sale or exchange of services means the performance of all kinds or services in the Philippines for others for a fee, remuneration or consideration, including x x x services of banks, non-bank financial intermediaries and finance companies; and non-life insurance companies (except their crop insurances), including surety, fidelity, indemnity and bonding companies..xx Coming now to the issue at hand Since petitioner is a non-bank financial intermediary, it is subject to 10% VAT for the tax years 1996 to 2002; however, with the levy, assessment and collection of VAT from non-bank financial intermediaries being specifically deferred by law, then petitioner is not liable for VAT during these tax years. But with the full implementation of the VAT system on non-bank financial intermediaries starting January 1, 2003, petitioner is liable for 10% VAT for said tax year. And beginning 2004 up to the present, by virtue of R.A. No. 9238, petitioner is no longer liable for VAT but it is subject to percentage tax on gross receipts from 0% to 5 %, as the case may be. 1. YES Applying jurisprudence, it was ruled that the subject of DST is not limited to the document alone. Pledge, which is an exercise of a privilege to transfer obligations, rights or properties incident thereto, is also subject to DST, thus xx.. the subject of a DST is not limited to the document embodying the enumerated transactions. A DST is an excise tax on the exercise of a right or privilege to transfer obligations, rights or properties incident thereto xx Pledge is among the privileges, the exercise of which is subject to DST. A pledge may be defined as an accessory, real and unilateral contract by virtue of which the debtor or a third person delivers to the creditor or to a third person movable property as security for the performance of the principal obligation, upon the fulfillment of which the thing pledged, with all its accessions and accessories, shall be returned to the debtor or to the third person True, the law does not consider said ticket as an evidence of security or indebtedness. However, for purposes of taxation, the same pawn ticket is proof of an exercise of a taxable privilege of concluding a contract of pledge. At any rate, it is not said ticket that creates the pawnshops obligation to pay DST but the exercise of the privilege to enter into a contract of pledge. There is therefore no basis in petitioners assertion that a DST is literally a tax on a document and that no tax may be imposed on a pawn ticket. Also, Section 195 of the NIRC unqualifiedly subjects all pledges to DST. It states that [o]n every x x x pledge x x x there shall be collected a documentary stamp tax x x x. It is clear, categorical, and needs no further interpretation or construction. In the instant case, there is no law specifically and expressly exempting pledges entered into by pawnshops from the payment of DST. Section 199 of the NIRC enumerated certain documents

which are not subject to stamp tax; but a pawnshop ticket is not one of them. Hence, petitioners nebulous claim that it is not subject to DST is without merit. ANTAM PAWNSHOP CORP VS. CIR G.R. No. 167962 September 19, 2008

FACTS: The Commissioner of Internal Revenue (CIR) issued against Antam a pre-assessment notice for deficiency VAT, Documentary Stamp Tax (DST), and minimum corporate income tax (MCIT) for taxable year 1998. The respondent issued Assessment Notices with corresponding Demand Letters for petitioners (a) deficiency VAT (b) deficiency MCIT (c) deficiency DST and (d) compromise penalties, all for the taxable year 1998. Prior to the issuance of the above Assessment Notices, petitioner partially paid for the MCIT due. Petitioner filed its written protest with the BIR. Due to the inaction of the BIR, Antam went up, on petition for review, to the CTA. The CTA held that Antam is liable for VAT, deficiency interest for MCIT, the compromise penalties are cancelled, but Antam is not liable for DST, saying that pursuant to Section 3 of P.D. 114,a pawn ticket is neither security nor a printed evidence of indebtedness. Consequently, it cannot be considered as a document subject to DST under Section 195 of the NIRC. However, for failure to present proof of payment of tax, Antam was held liable for DST on subscribed capital stock. Both parties filed their respective MRs which were subsequently denied by the CTA. The CIR filed with the CA a petition for partial review to assail the cancellation by the CTA of deficiency DST on pawn tickets. (Antam filed as well) In its Decision, the CA ruled that pawn tickets are subject to DST. It contended that a pawn ticket is an evidence of the contract of pledge and thus subject to DST pursuant to Section 195 of the NIRC. Antam, on the other hand, argued that for a document to be taxable under Section 195 of the NIRC, the document must show on its face the existence of a debt. The CA agreed with the dissenting opinion of a CTA Justice that the pawn ticket is the logical document evidencing a contract of pledge and thus subject to DST. The CA explained that the DST provided under Section 173 of the NIRC is levied on the documents but in respect to the transaction so had or accomplished. In general, documentary stamp taxes are levied on the

exercise by persons of certain privileges conferred by law for the creation, revision or termination of specific legal relationships through the execution of specific instruments. Examples of such privileges include entering into a contract of pledge. The CA ratiocinated that although P.D. No. 114 defines a pawn ticket as neither a security nor printed evidence of indebtedness, the law also acknowledged that pawnshops enter into a contract of pledge. Dissatisfied with the decision of the CA, Antam is now before Us with a petition under Rule 45. ISSUE: ARE pawn tickets subject to documentary stamp tax?

HELD: the appealed decision is affirmed with modifications

YES; Section 195 of the NIRC imposes, among others, a DST on pledge of personal property made as a security for the payment of a sum of money. A pledge may be defined as an accessory, real, and unilateral contract by virtue of which the debtor or a third person delivers to the creditor or third person movable property as security for the performance of the principal obligation, upon fulfillment of which the thing pledged with all its accessions and accessories shall be returned to the debtor or third person.

A documentary stamp tax is in the nature of an excise tax. It is not imposed upon the business transacted but is an excise upon the privilege, opportunity or facility offered at exchanges for the transaction of the business. In general, documentary stamp taxes are levied on the exercise by persons of certain privileges conferred by law for the creation, revision, or termination of specific legal relationships through the execution of specific instruments

**

At the time of every loan or pledge, the pawnbroker or the pawnshop is required to deliver to each person pawning or pledging a ticket signed by the pawnbroker containing, among others: (1) the amount of the loan; (2) the date the loan was granted; (3) rate of interest; and (4) the name and residence of the pawnee. Considering that the pawn ticket issued by the pawnshop should contain the foregoing, the pawn ticket is evidently a proof of a contract of pledge. We agree with petitioner that the law does not consider the pawn ticket as a security nor a printed evidence of indebtedness. However, what is subject to DST is not the ticket itself but the privilege of

entering into a contract of pledge. For purposes of Section 195, pawnshop tickets need not be an evidence of indebtedness nor a debt instrument because it taxes the same as a pledge instrument For purposes of taxation, the same pawn ticket is proof of an exercise of a taxable privilege of concluding a contract of pledge. At any rate, it is not said ticket that creates the pawnshops obligation to pay DST but the exercise of the privilege to enter into a contract of pledge. There is therefore no basis in petitioners assertion that a DST is literally a tax on a document and that no tax may be imposed on a pawn ticket. Also. Section 199 of the NIRC enumerated certain documents which are not subject to stamp tax; but a pawnshop ticket is not one of them. Lim Tay vs. Court of Appeals [GR 126891, 5 August 1998] Facts: On 8 January 1980, Sy Guiok secured a loan from Lim Tay in the amount of P40,000 payable within 6 months. To secure the payment of the aforesaid loan and interest thereon, Guiok executed a Contract of Pledge in favor of Lim Tay whereby he pledged his 300 shares of stock in the Go Fay & Company Inc. Guiok obliged himself to pay interest on said loan at the rate of 10% per annum from the date of said contract of pledge. On the same date, Alfonso Sy Lim secured a loan, from Lim Tay in the amount of P40,000 payable in 6 months. To secure the payment of his loan, Sy Lim executed a "Contract of Pledge" covering his 300 shares of stock in Go Fay & Co. Under said contract, Sy Lim obliged himself to pay interest on his loan at the rate of 10% per annum from the date of the execution of said contract. The contractual stipulation in the pledge showed that Lim Tay was merely authorized to foreclose the pledge upon maturity of the loans, not to own them. Such foreclosure is not automatic, for it must be done in a public or private sale. Guiok and Sy Lim endorsed their respective shares of stock in blank and delivered the same to Lim Tay. However, Guiok and Sy Lim failed to pay their respective loans and the accrued interests thereon to Lim Tay. In October 1990, Lim Tay filed a "Petition for Mandamus" against Go Fay & Co., with the SEC (SEC Case 03894), praying that an order be issued directing the corporate secretary of Go Fay & Co. to register the stock transfers and issue new certificates in favor of Lim Tay; and ordering Go Fay & Co. to pay all dividends due and unclaimed on the said certificates to Lim Tay. In the interim, Sy Lim died. Guiok and the Intestate Estate of Alfonso Sy Lim, represented by Conchita Lim, filed their Answer-In-Intervention with the SEC. After due proceedings, the SEC hearing officer promulgated a Decision dismissing Lim Tay's Complaint on the ground that although the SEC had jurisdiction over the action, pursuant to the Decision of the Supreme Court in the case of "Rural Bank of Salinas et. al. versus Court of Appeals, et al., 210 SCRA 510," he failed to prove the legal basis for the secretary of the Corporation to be compelled to register stock transfers in favor of Lim Tay and to issue new certificates of stock under his name. Lim Tay appealed the Decision of the hearing officer to the SEC, but, on 7 March 1996, the SEC promulgated a Decision, dismissing Lim Tay's appeal. On appeal to the Court of Appeals, the

appellate court debunked Lim Tay's claim that he had acquired ownership over the shares by virtue of novation, holding that Guiok's and Sy Lim's indorsement and delivery of the shares were pursuant to Articles 2093 and 2095 of the Civil Code and that Lim Tay's receipt of dividends was in compliance with Article 2102 of the same Code. Lim Tay's claim that he had acquired ownership of the shares by virtue of prescription was likewise dismissed by the appellate court. Lim Tay brought before the Supreme Court a Petition for Review on Certiorari in accordance with Rule 45 of the Rules of Court. Issue: Whether Lim Tay is the owner of the shares previously subjected to pledge, for him to cause the registration of said shares in his own name. Held: Lim Tay's ownership over the shares was not yet perfected when the Complaint was filed. The contract of pledge certainly does not make him the owner of the shares pledged. Further, whether prescription effectively transferred ownership of the shares, whether there was a novation of the contracts of pledge, and whether laches had set in were difficult legal issues, which were unpleaded and unresolved when Lim Tay asked the corporate secretary of Go Fay to effect the transfer, in his favor, of the shares pledged to him. Lim Tay has failed to establish a clear legal right. Lim Tay's contention that he is the owner of the said shares is completely without merit. Lim Tay does not have any ownership rights at all. At the time Lim Tay instituted his suit at the SEC, his ownership claim had no prima facie leg to stand on. At best, his contention was disputable and uncertain. Lim Tay cannot claim to have acquired ownership over the certificates of stock through extraordinary prescription, as provided for in Article 1132 of the Civil Code. What is required by Article 1132 is possession in the concept of an owner. Herein, Lim Tay's possession of the stock certificates came about because they were delivered to him pursuant to the contracts of pledge. His possession as a pledgee cannot ripen into ownership by prescription. Lim Tay expressly repudiated the pledge, only when he filed his Complaint and claimed that he was not a mere pledgee, but that he was already the owner of the shares. Based on the foregoing, Lim Tay has not acquired the certificates of stock through extraordinary prescription. Neither did Lim Tay acquire the shares by virtue of a novation of the contract of pledge. Novation cannot be presumed by Guiok's and Sy Lim's indorsement and delivery of the certificates of stock covering the 600 shares, nor Lim Tay's receipt of dividends from 1980 to 1983, nor the fact that Guiok and Sy Lim have not instituted any action to recover the shares since 1980. Novation is never presumed inferred.