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On Failure to Deliver Stock Certificate and Rescission Under Article 1191 | FEGDI v. Vertex

Fil-Estate Golf and Development, Inc. and Fil-Estate Land, Inc., Petitioners, vs.  Vertex Sales and Trading, Inc., Respondent | G.R. No. 202079


Fil-Estate Golf and Development, Inc. (FEGDI) is a stock corporation whose primary business is the development of golf courses. Fil-Estate Land, Inc. (FELI) is also a stock corporation, but is engaged in real estate development. FEGDI was the developer of the Forest Hills Golf and Country Club (Forest Hills) and, in consideration for its financing support and construction efforts, was issued several shares of stock of Forest Hills.

Sometime in August 1997, FEGDI sold, on installment, to RS Asuncion Construction Corporation (RSACC) one Class “C” Common Share of Forest Hills. Prior to the full payment of the purchase price, RSACC sold, on February 11, 1999, the Class “C” Common Share to respondent Vertex Sales and Trading, Inc. (Vertex). RSACC advised FEGDI of the sale to Vertex and FEGDI, in turn, instructed Forest Hills to recognize Vertex as a shareholder. For this reason, Vertex enjoyed membership privileges in Forest Hills.

Despite Vertex’s full payment, the share remained in the name of FEGDI. Seventeen (17) months after the sale (or on July 28, 2000), Vertex wrote FEDGI a letter demanding the issuance of a stock certificate in its name. FELI replied, initially requested Vertex to first pay the necessary fees for the transfer. Although Vertex complied with the request, no certificate was issued. This prompted Vertex to make a final demand on March 17, 2001. As the demand went unheeded, Vertex filed on January 7, 2002 a Complaint for Rescission with Damages and Attachment against FEGDI, FELI and Forest Hills. It averred that the petitioners defaulted in their obligation as sellers when they failed and refused to issue the stock certificate covering the subject share despite repeated demands. On the basis of its rights under Article 1191 of the Civil Code, Vertex prayed for the rescission of the sale and demanded the reimbursement of the amount it paid, plus interest. During the pendency of the rescission action (or on January 23, 2002), a certificate of stock was issued in Vertex’s name, but Vertex refused to accept it.


Whether or not the failure of FEGDI to deliver  the stock certificate gave Vertex  the right to rescind the sale under Article 1191 of the Civil Code.



Physical delivery of the stock certificate required for consummation of sale of shares of stock

The factual backdrop of this case is similar to that of Raquel-Santos v. Court of Appeals, where the Court held that in “a sale of shares of stock, physical delivery of a stock certificate is one of the essential requisites for the transfer of ownership of the stocks purchased.

Sec. 63 of the Corporation Code provides:

SEC. 63. Certificate of stock and transfer of shares. – The capital stock of stock corporations shall be divided into shares for which certificates signed by the president or vice-president, countersigned by the secretary or assistant secretary, and sealed with the seal of the corporation shall be issued in accordance with the by-laws. Shares of stock so issued are personal property and may be transferred by delivery of the certificate or certificates indorsed by the owner or his attorney-in-fact or other person legally authorized to make the transfer.1âwphi1 No transfer, however, shall be valid, except as between the parties, until the transfer is recorded in the books of the corporation showing the names of the parties to the transaction, the date of the transfer, the number of the certificate or certificates and the number of shares transferred.

No shares of stock against which the corporation holds any unpaid claim shall be transferable in the books of the corporation.

In this case, Vertex fully paid the purchase price by February 11, 1999 but the stock certificate was only delivered on January 23, 2002 after Vertex filed an action for rescission against FEGDI.

Failure to deliver the stock certificate within reasonable time is a substantial breach of contract

Under these facts, considered in relation to the governing law, FEGDI clearly failed to deliver the stock certificates, representing the shares of stock purchased by Vertex, within a reasonable time from the point the shares should have been delivered. This was a substantial breach of their contract that entitles Vertex the right to rescind the sale under Article 1191 of the Civil Code.

Rescission - Breach of Contract

Exercise of stockholder’s rights does not amount to consummation of sale

It is not entirely correct to say that a sale had already been consummated as Vertex already enjoyed the rights a shareholder can exercise. The enjoyment of these rights cannot suffice where the law, by its express terms, requires a specific form to transfer ownership.

CIR v. DLSU – Tax Exemption of Non-Stock, Non-Profit Educational Institutions


The tax exemption granted by the Constitution to non-stock, non-profit educational institutions is not subject to limitations imposed by law.


Sometime in 2004, the Bureau of Internal Revenue (BIR) issued to DLSU Letter of Authority (LOA) No. 2794 authorizing its revenue officers to examine the latter’s books of accounts and other accounting records for all internal revenue taxes for the period Fiscal Year Ending 2003 and Unverified Prior Years.

On May 19, 2004, BIR issued a Preliminary Assessment Notice to DLSU.

Subsequently on August 18, 2004, the BIR through a Formal Letter of Demand assessed DLSU the following deficiency taxes: (1) income tax on rental earnings from restaurants/canteens and bookstores operating within the campus; (2) value-added tax (VAI) on business income; and (3) documentary stamp tax (DSI) on loans and lease contracts. 

DLSU protested the assessment. The Commissioner failed to act on the protest; thus, DLSU filed on August 3, 2005 a petition for review with the CTA Division.

DLSU, a non-stock, non-profit educational institution, principally anchored its petition on Article XIV, Section 4 (3) of the Constitution, which reads:

(3) All revenues and assets of non-stock, non-profit educational institutions used actually, directly, and exclusively for educational purposes shall be exempt from taxes and duties. xxx.

On January 5, 2010, the CTA Division partially granted DLSU’s petition for review. 

Both the Commissioner and DLSU moved for the reconsideration of the January 5, 2010 decision. On April 6, 2010, the CTA Division denied the Commissioner’s motion for reconsideration while it held in abeyance the resolution on DLSU’s motion for reconsideration.

On May 13, 2010, the Commissioner appealed to the CTA En Banc (CTA En Banc Case No. 622) arguing that DLSU’s use of its revenues and assets for non-educational or commercial purposes removed these items from the exemption coverage under the Constitution.

On May 18, 2010, DLSU formally offered to the CTA Division supplemental pieces of documentary evidence to prove that its rental income was used actually, directly and exclusively for educational purposes.

On July 29, 2010, the CTA Division, in view of the supplemental evidence submitted, reduced the amount of DLSU’s tax deficiencies.

Consequently, the Commissioner supplemented its petition with the CTA En Banc and argued that the CTA Division erred in admitting DLSU’s additional evidence.

The CTA En Banc dismissed the Commissioner’s petition for review and sustained the findings of the CTA Division.

Relying on the findings of the court-commissioned Independent Certified Public Accountant (Independent CPA), the CTA En Banc found that DLSU was able to prove that a portion of the assessed rental income was used actually, directly and exclusively for educational purposes; hence, exempt from tax. The CTA En Banc was satisfied with DLSU’s supporting evidence confirming that part of its rental income had indeed been used to pay the loan it obtained to build the university’s Physical Education – Sports Complex.

Parenthetically, DLSU’s unsubstantiated claim for exemption, i.e., the part of its income that was not shown by supporting documents to have been actually, directly and exclusively used for educational purposes, must be subjected to income tax and VAT.

The Commissioner moved but failed to obtain a reconsideration of the CTA En Banc’s December 10, 2010 decision. Thus, she came to the Supreme Court  for relief through a petition for review on certiorari.

Arguments of the CIR

The Commissioner submits that DLSU’s rental income is taxable regardless of how such income is derived, used or disposed of. DLSU’s operations of canteens and bookstores within its campus even though exclusively serving the university community do not negate income tax liability.

The Commissioner posits that the 1997 Tax Code qualified the tax exemption granted to non-stock, non-profit educational institutions such that the revenues and income they derived from their assets, or from any of their activities conducted for profit, are taxable even if these revenues and income are used for educational purposes.


Whether the income of DLSU from the leases of its real properties is subject to tax regardless of its disposition.



The revenues and assets of non-stock, non-profit educational institutions proved to have been used actually, directly, and exclusively for educational purposes are exempt from duties and taxes.

While the present petition appears to be a case of first impression, the Court in the YMCA case had in fact already analyzed and explained the meaning of Article XIV, Section 4 (3) of the Constitution. The Court in that case made doctrinal pronouncements that are relevant to the present case.

The Court then significantly laid down the requisites for availing the tax exemption under Article XIV, Section 4 (3), namely: (1) the taxpayer falls under the classification non-stock, non-profit educational institution; and (2) the income it seeks to be exempted from taxation is used actually, directly and exclusively for educational purposes.

We now adopt YMCA as precedent and hold that:

1. The last paragraph of Section 30 of the Tax Code is without force and effect with respect to non-stock, non-profit educational institutions, provided, that the non-stock, non-profit educational institutions prove that its assets and revenues are used actually, directly and exclusively for educational purposes.

2. The tax-exemption constitutionally-granted to non-stock, non-profit educational institutions, is not subject to limitations imposed by law.

The tax exemption granted by the Constitution to non-stock, non-profit educational institutions is conditioned only on the actual, direct and exclusive use of their assets, revenues and income for educational purposes.

X x x x x a plain reading of the Constitution would show that Article XIV, Section 4 (3) does not require that the revenues and income must have also been sourced from educational activities or activities related to the purposes of an educational institution. The phrase all revenues is unqualified by any reference to the source of revenues. Thus, so long as the revenues and income are used actually, directly and exclusively for educational purposes, then said revenues and income shall be exempt from taxes and duties.

The tax exemption granted by the Constitution to non-stock, non-profit educational institutions, unlike the exemption that may be availed of by proprietary educational institutions, is not subject to limitations imposed by law.

That the Constitution treats non-stock, non-profit educational institutions differently from proprietary educational institutions cannot be doubted. As discussed, the privilege granted to the former is conditioned only on the actual, direct and exclusive use of their revenues and assets for educational purposes. In clear contrast, the tax privilege granted to the latter may be subject to limitations imposed by law.

Thus, we declare the last paragraph of Section 30 of the Tax Code without force and effect for being contrary to the Constitution insofar as it subjects to tax the income and revenues of non-stock, non-profit educational institutions used actually, directly and exclusively for educational purpose. We make this declaration in the exercise of and consistent with our duty to uphold the primacy of the Constitution.

For all these reasons, we hold that the income and revenues of DLSU proven to have been used actually, directly and exclusively for educational purposes are exempt from duties and taxes.

See: Income Tax Treatment of Educational Institutions

Tiangco v. ABS-CBN – On Employee and Independent Contractor


Carmela Tiangco, Petitioner, v. ABS-CBN Broadcasting Corporation, Respondent; G.R. No. 200434


Petitioner Carmela C. Tiangco (petitioner) was initially engaged by respondent ABS-CBN Corporation (ABS-CBN) as Talent Newscaster, on an exclusive basis, on 22 July 1986 with a monthly talent fee of ₱8,000.00 for a period of 1 year. Subsequently, petitioner’s contract was renewed several times.

Upon expiration of the contract dated 27 April 1991, ABS-CBN entered into the May 1994 Agreement (Agreement) with Mel & Jay; Management and Development Corporation (MJMDC), committing to provide petitioner’s services to ABS-CBN as exclusive talent for radio and television.

Thereafter, ABS-CBN issued the Memorandum dated 08 February 1995 (Memorandum) concerning commercial appearances of its talents and regular employees. Citing the “clear … need to protect the integrity and credibility of the news and public affairs programs”, the Memorandum; directed all on-air and/or on-camera talents and employees in the Radio and the News and Public Affairs Departments to refrain from appearing in commercial advertisements, violation of which shall be considered a serious breach of company rules and regulations.

Petitioner allegedly violated the Memorandum when she appeared in a Tide commercial that aired sometime in December 1995. Consequently, on 16 January 1996, ABS-CBN placed petitioner under suspension for three months without pay from her co-anchor positions in TV Patrol on Channel 2 and Mel & Jay radio program over at DZMM.

To clarify matters connected with the suspension, the parties met and exchanged several correspondences where they expressed their views and misgivings on the issue. The parties exerted efforts to come up with an amicable solution, but in the end could not come to an agreement. Petitioner maintained that she had the verbal approval of ABS-CBN management to proceed with the Tide commercial; that the three-month suspension without pay was harsh and unjust. On the other hand, ABS-CBN, through Frederico M. Garcia, denied that such verbal approval was ever given to petitioner, and that the penalty of suspension was decided after a lengthy and careful deliberation and on the basis of all the attendant facts and circumstances.

On 11 March 1996, petitioner filed a complaint against ABS-CBN and its officers for illegal dismissal, illegal suspension, and claims for backwages, separation pay, 13th month pay, travel, vacation benefits of ₱150,000.00, shares of stocks, damages, and attorney’s fees.

Ruling of the Labor Arbiter

Labor Arbiter Jose De Vera, in his 29 April 1999 Decision, ruled in favor of petitioner.

Appeal to NLRC

On 07 May 1999, ABS-CBN appealed this decision to the National Labor Relations Commission (NLRC) on the ground of lack of jurisdiction considering that no employer-employee relationship existed between ABS-CBN and petitioner.

Subsequently, ABS-CBN filed a Manifestation informing the NLRC of the Supreme Court’s decision dated 10 June 2004 in the case of Sonza v. ABS-CBN Broadcasting Corporation, involving Jay Sonza, the other half of the “Mel & Jay” show. ABS-CBN manifested that the Supreme Court pronounced that broadcast and entertainment talents like Sonza are not employees but independent contractors.

Ruling of the NLRC

The NLRC rendered its Decision dated 31 July 2006 and reversed LA De Vera’s decision.

The NLRC held that it cannot adopt the LA’s findings based on the principle of stare decisis. This, considering that Sonza and petitioner were similarly situated as both were covered by the Agreement containing identical provisions. As such, the Court’s ruling in Sonza applied equally to both of them.

Appeal to the CA

Petitioner elevated the NLRC’s decision to the Court of Appeals (CA) via a Petition for Certiorari on the ground that the NLRC committed grave abuse of discretion when it applied Sonza vs. ABS-CBN Broadcasting Corp. without considering the substantial differences in the situations.

On 08 September 2010, the case was referred to the Philippine Mediation Center (PMC)-CA for mediation pursuant to A.M. No. 04-3-15-SC. Thereafter, the parties executed and signed a Partial Settlement Agreement.

Ruling of the CA

On 27 January 2012, the CA rendered the assailed Decision based on the Partial Settlement Agreement.

The CA noted the stipulation in the Partial Settlement Agreement that the said agreement shall not in any way be considered as an admission or denial that would affect the other issues submitted for final adjudication. Further, the CA ruled that “the final settlement of the monetary claims of Petitioner [petitioner herein] against Private Respondent [ABS-CBN], the remaining issue raised in the instant Petition of whether or not the Public Respondent committed grave abuse of discretion in refusing to inhibit itself in the resolution of the case, has now become moot and academic.”


Whether or not petitioner was an employee of ABS-CBN.



Independent Contractor

An independent contractor is one who carries on a distinct and independent business and undertakes to perform the job, work, or service on their own account and under their own responsibility according to their own manner and method, free from the control and direction of the principal in all matters connected with the performance of the work except as to the results thereof. Hence, while an independent contractor enjoys independence and freedom from the control and supervision of their principal, an employee is subject to the employer’s power to control the means and the methods by which the employee’s work is to be performed and accomplished.

In the landmark case of Sonza v. ABS-CBN Broadcasting Corporation, the Court declared therein petitioner, Jose Y. Sonza (Sonza), a television and radio broadcasting talent, as an independent contractor. As previously mentioned, MJMDC, on behalf of Sonza, similarly signed an Agreement with ABS-CBN, being the on-air program partner of herein petitioner. The Agreement stated that Sonza was to serve as a talent for radio and television for ABS-CBN exclusively.

On 1 April 1996, Sonza rescinded the Agreement based on ABS CBN’s alleged breach. Sonza later filed a complaint against ABS-CBN claiming that he was not paid his salaries, service incentive leave, and 13th month pay, among others, on the premise that he was an ABS-CBN employee. In its defense, ABS-CBN argued that Sonza was an independent contractor. The Court agreed with ABS-CBN.

Notably, the Court held Sonza to not be applicable in the cases of Nazareno, Dumpit-Murillo, Begino and Concepcion because, unlike in Sonza, the complainants in these cases did not possess unique skills, talent, and celebrity status for which they were hired in their respective capacities as production assistants, newscaster and co-anchor, camera operator, editor, reporters, and OB van driver. The Court further found that there was a remarkable gap between the compensation in Sonza with those of the complainants in Nazareno, Dumpit-Murillo, Begino, and Concepcion.

This tells us that there is no inflexible rule to determine if a person is an employee or an independent contractor; thus, the characterization of the relationship must be made based on the particular circumstances of each case. There are several factors that may be considered by the courts, but the right to control remains the dominant factor in determining whether one is an employee or an independent contractor.

Petitioner’s Arguments

Petitioner claims that she was an ABS-CBN employee based on the four-fold test:

First, ABS-CBN specifically selected and hired her for her individual and peculiar talents, skills, personality, and celebrity status;

Second, ABS-CBN paid her salaries through a payroll account every 10th and 25th day of each month and withheld compensation income tax;

Third, petitioner was subject to ABS-CBN’s rules and regulation as, in fact, ABS-CBN placed her under a three-month suspension without pay; and

Fourth, unlike her role as co-host of “Mel & Jay”, ABS-CBN controlled the means and method of her performance of her job as newscaster for TV Patrol starting in 1986 as she was merely tasked to read the news. Petitioner further maintains that she also assumed the roles as Director for Lingkod Bayan, a job grade S4, segment producer in TV Patrol, and news reporter.

Petitioner was an independent contractor

First, petitioner’s acknowledgment that she was hired by reason of her peculiar talents, skills, personality, and celebrity status proved the presence of one of the elements of an independent contractor. A unique skill, expertise, or talent is one of the factors in determining the nature of a person’s status at work.

Second, payment through the company payroll on specified dates with income tax withheld at source is not conclusive proof of employer-employee  relations. Such an arrangement is oftentimes agreed upon only for purposes of convenience and does not, in itself, create a badge of employment status. What is notable is petitioner’s talent fee package, which as of her last contract” was at ₱410,000.00 for the first year and ₱417,000.00 for the second and third years. In addition, petitioner was given a signing bonus of ₱500,000.00 worth of ABS-CBN stocks.

This extraordinarily high rate is given to those with unique skills, expertise, or talent like petitioner, who is considered an expert in the field with special qualities that an ordinary employee does not normally possess. This placed her on equal terms with ABS-CBN as she was allowed the power to bargain for the terms of her engagement, including her talent fee. Unlike ordinary employees, who are usually in a position of weakness, petitioner had a say on the terms of her engagement.

Third, petitioner viewed her three-month suspension without pay as proof that ABS-CBN had power of discipline over her. This is incorrect. The suspension itself was improper under the circumstances. Records showed that ABS-CBN suspended petitioner for her alleged violation of the Memorandum prohibiting talents from appearing in commercials. The prohibition was likewise imprinted in petitioner’s contract” as part of the warranty, stating that “she shall not appear in commercials nor plug, mention, or otherwise promote in the radio and television programs herein any radio or television program, segment or feature of any other radio or television station without the prior written approval of the company.”

Although there was basis to hold petitioner responsible for the breach, ABS-CBN has no basis to suspend. The tie that binds ABS-CBN and petitioner was the Agreement they signed in May 1994. There is nothing in the Agreement that allows ABS-CBN to suspend petitioner for violating its rules. Its remedy should have been to terminate the Agreement as stipulated. In any case, the petitioner’s improper suspension had been rectified with the Partial Settlement Agreement wherein one of the monetary claims paid by ABS-CBN was petitioner’s salaries during the period of her suspension.

Lastly, petitioner alleged that ABS-CBN controlled the manner she performed her job, particularly as a news anchor of TV Patrol, as she merely read the news. As a news anchor, petitioner is tasked to read or present a news copy that she or another person wrote. Nothing on record, however, shows that petitioner performed other tasks in relation to being an anchor, or that ABS-CBN dictated how petitioner should read the news or perform her other related tasks, if any. As a well-known veteran news anchor, petitioner’s manner in delivering the news was distinctly her own. Her voice, stature, aura, and representation, form part of the unique qualities that impelled ABS-CBN to pick her for the job. Petitioner “reading the news” is not the same as an average person reading the same news. The impact would simply not be the same as there is premium that goes with petitioner’s stature.

As regards the other positions petitioner assumed, i.e., segment producer and Director of Lingkod Bayan, there were no specifics presented in terms of job description vis-a-vis ABS-CBN’s control in its performance. As for the Director of Lingkod Bayan, petitioner merely alleged that it was in job grade S4, a supervisory position in ABS-CBN’s company job classification. Nomenclatures are not controlling in determining the nature of the job.

The Court notes that petitioner admitted that she was not under the control of ABS-CBN in her role as co-host of the “Mel & Jay” show in her Petition, saying, “unlike her job as ‘co-host’ of respondent ABS-CBN’s television and radio programs Mel & Jay, how petitioner performed her job as ‘newscaster’ for TV Patrol was 100% under the sole and exclusive control of respondent ABS-CBN.”

Necessity and Desirability of Work and Repeated Contract Renewal

To strengthen her claim that she was an employee, petitioner invoked the rulings of this Court in Fuji Television Network Inc. vs. Espiritu and in Dumpit-Afurillo. In these cases, the Court ruled that the repeated renewals of complainants’ contracts indicated the necessity and desirability of their work in the usual course of respondents’ business. Petitioner maintains that her tasks as newscaster, segment producer, and reporter,among others, were necessary and desirable to ABS-CBN’s business and that, her contract were renewed several times during her 10- year employment. Her submission is misplaced. In Fuji and Dumpit-Murillo, the fact that the complainants in said cases were employees of the respondents was already established. The Court merely used the repeated renewals of contract to show that the complainants were performing jobs that are usually necessary and desirable to the respondents’ business for purposes of determining if they were regular employees under Article 280 of the Labor Code. Here, petitioner’s employment status was disproved.

Applicability of Sonza v. ABS-CBN

Likewise, petitioner challenges the applicability of Sonza to her case based on these differences:

“First, the difference in what petitioner and Jay Sonza were made to do under their May 1994 Agreements. Second, the difference in their employment history with private respondent which petitioner, unlike Jay Sonza, was fortunate to have been given a full-blown trial. The facts and circumstances of her ten (10) year employment with private respondent have been laid bare for this Honorable Court to appreciate, and for the Honorable Court to uphold, as did the Labor Arbiter a quo, petitioner’s right and entitlement as a regular employee of private respondent.

The Court agrees with petitioner that she is not similarly situated with Sonza in terms of the roles she assumed under the Agreement and her length of stay with the network. However, despite the dissimilarities, there is one important element that petitioner and Sonza share – they both possessed unique skills, expertise, and talent, for which they were both engaged as ABS-CBN’s exclusive talents. In Sonza, we ruled:

Independent contractors often present themselves to possess unique skills, expertise or talent to distinguish them from ordinary employees. The specific selection and hiring of SONZA, because of his unique skills, talent and celebrity status not possessed by ordinary employees, is a circumstance indicative, but not conclusive, of an independent contractual relationship. If SONZA did not possess such unique skills, talent and celebrity status, ABS-CBN would not have entered into the Agreement with SONZA but would have hired him through its personnel department just like any other employee.

In addition, petitioner failed to establish that ABS-CBN controlled the manner in which she performed her job as news anchor for TV Patrol. On the contrary, the Court finds that petitioner performed the job according to her own manner and method, free from the network’s control. Possession of unique skills, expertise, or talent is a persuasive element of an independent contractor. It becomes conclusive if it is established that the worker performed the work according to their own manner and method and free from the principal’s control except to the result.

All told, the Court concludes that petitioner is an independent contractor.


Filinvest Development Corporation v. Del Rosario – On Deposit under Section 267 of the LGC


The deposit requirement applies only to initiatory actions assailing the validity of tax sales…



Filinvest was the owner of a parcel of land located at Lot No. 18, Block No. 6 PCS-13-001193, Brgy. Silangan, Capitol, Quezon City, covered by Transfer Certificate of Title (TCT) No. N375865 . Filinvest was delinquent in paying the subject land’s real estate taxes. Hence, a public auction was held on October 3, 2013, wherein the subject property was awarded to respondent as the highest bidder for the amount of ₱23,602.53. On November 18, 2013, the Office of the City Treasurer issued a Certificate of Sale of Delinquent Property to Purchaser. After the lapse of one-year, Filinvest failed to redeem the subject property. A Final Bill of Sale was issued on March 24, 2015. 

For failure of Filinvest to surrender the TCT to respondent, the latter filed a petition for confirmation of final bill of sale and entry of new certificate of title, invoking the provisions of Section 75 of Presidential Decree No. 1529 and Republic Act No. (R.A.) 7160.

On November 29, 2016, the Regional Trial Court (RTC) issued a Decision granting the petition.

Filinvest filed an appeal to the Court of Appeals (CA). 

In its Decision dated January 27, 2020, the CA denied the appeal and affirmed the Decision of the RTC. The CA ruled that Filinvest’s arguments as to the lack of notice of the tax delinquency and inadequacy of the price in the auction sale cannot be entertained by the CA due to non-compliance by Filinvest with Section 267 of R.A. 7160, otherwise known as the “Local Government Code” (LGC) requiring Filinvest to institute an action assailing the validity of sale at public auction or that the latter paid the required deposit under Section 267 of the LGC. For failure to fulfill these requirements, Filinvest does not have the legal right to question the validity of the sale at public auction.


Whether or not Filinvest needs to comply with the deposit requirement under Section 267 of the Local Government Code  before the issue on the validity of the tax auction sale can be taken cognizance by the Court.



In the case of Sps. Plaza v. Lustiva,  the Court clarified that the deposit requirement applies only to initiatory actions assailing the validity of tax sales, as the section makes use of term “entertain” and “institution.” The deposit is a jurisdictional requirement which must be satisfied before the court can entertain any action assailing the validity of the public auction sale.

In the case at bar, it was respondent who filed a petition for confirmation of final bill of sale and entry of new certificate of title. The issue as to the nullity of the public auction sale was raised by Filinvest merely as a defense and in no way converted the action for annulment of a tax sale. Hence, Filinvest need not make a deposit to the court before the latter can question the validity of the tax sale.

MEDICARD v. CIR – On Gross Receipts of Health Maintenance Organizations for VAT Purposes


The amounts earmarked and eventually paid by MEDICARD to the medical service providers do not form part of gross receipts for VAT purposes…



MEDICARD is a Health Maintenance Organization (HMO) that provides prepaid health and medical insurance coverage to its clients. Individuals enrolled in its health care programs pay an annual membership fee and are entitled to various preventive, diagnostic and curative medical services provided by duly licensed physicians, specialists and other professional technical staff participating in the group practice health delivery system at a hospital or clinic owned, operated or accredited by it.

Finding some discrepancies between MEDICARD’s Income Tax Returns (ITR) and VAT Returns, the CIR informed MEDICARD and issued a Letter Notice (LN) No. 122-VT-06-00-00020 dated September 20, 2007. Subsequently, the CIR also issued a Preliminary Assessment Notice (PAN) against MEDICARD for deficiency VAT. A Memorandum dated December 10, 2007 was likewise issued recommending the issuance of a Formal Assessment Notice (FAN) against MEDICARD. On. January 4, 2008, MEDICARD received CIR’s FAN dated December’ 10, 2007 for alleged deficiency VAT for taxable year 2006 in the total amount of  ₱196,614,476.69,10 inclusive of penalties. 

According to the CIR, the taxable base of HMOs for VAT purposes is its gross receipts without any deduction under Section 4.108.3(k) of Revenue Regulation (RR) No. 16-2005. Citing Commissioner of Internal Revenue v. Philippine Health Care Providers, Inc., the CIR argued that since MEDICARD. does not actually provide medical and/or hospital services, but merely arranges for the same, its services are not VAT exempt.

On June 19, 2009, MEDICARD received CIR’s Final Decision on Disputed Assessment dated May 15, 2009, denying MEDICARD’s protest.

On July 20, 2009, MEDICARD proceeded to file a petition for review before the CTA, reiterating its position before the tax authorities.


Whether the amounts earmarked and eventually paid by MEDICARD to the medical service providers form part of its gross receipts for VAT purposes.



According to the CTA en banc, the entire amount of membership fees should form part of MEDICARD’s gross receipts because the exclusions to the gross receipts under RR No. 4-2007 does not apply to MEDICARD. What applies to MEDICARD is the definition of gross receipts of an HMO under RR No. 16-2005 and not the modified definition of gross receipts in general under the RR No. 4-2007.

Gross Receipts under RR No. 16-2005

The CTA en banc overlooked that the definition of gross receipts under. RR No. 16-2005 merely presumed that the amount received by an HMO as membership fee is the HMO’s compensation for their services. As a mere presumption, an HMO is, thus, allowed to establish that a portion of the amount it received as membership fee does NOT actually compensate it but some other person, which in this case are the medical service providers themselves. It is a well-settled principle of legal hermeneutics that words of a statute will be interpreted in their natural, plain and ordinary acceptation and signification, unless it is evident that the legislature intended a technical or special legal meaning to those words. The Court cannot read the word “presumed” in any other way.

Gross Receipts under Section 108 of the NIRC

It is notable in this regard that the term gross receipts as elsewhere mentioned as the tax base under the NIRC does not contain any specific definition. Therefore, absent a statutory definition, this Court has construed the term gross receipts in its plain and ordinary meaning, that is, gross receipts is understood as comprising the entire receipts without any deduction. Congress, under Section 108, could have simply left the term gross receipts similarly undefined and its interpretation subjected to ordinary acceptation,. Instead of doing so, Congress limited the scope of the term gross receipts for VAT purposes only to the amount that the taxpayer received for the services it performed or to the amount it received as advance payment for the services it will render in the future for another person.

MEDICARD as a Health Maintenance Organization

In the proceedings below, the nature of MEDICARD’s business and the extent of the services it rendered are not seriously disputed. As an HMO, MEDICARD primarily acts as an intermediary between the purchaser of healthcare services (its members) and the healthcare providers (the doctors, hospitals and clinics) for a fee. By enrolling membership with MEDICARD, its members will be able to avail of the pre-arranged medical services from its accredited healthcare providers without the necessary protocol of posting cash bonds or deposits prior to being attended to or admitted to hospitals or clinics, especially during emergencies, at any given time. Apart from this, MEDICARD may also directly provide medical, hospital and laboratory services, which depends upon its member’s choice.

Thus, in the course of its business as such, MED ICARD members can either avail of medical services from MEDICARD’s accredited healthcare providers or directly from MEDICARD. In the former, MEDICARD members obviously knew that beyond the agreement to pre-arrange the healthcare needs of its members, MEDICARD would not actually be providing the actual healthcare service. Thus, based on industry practice, MEDICARD informs its would-be member beforehand that 80% of the amount would be earmarked for medical utilization and only the remaining 20% comprises its service fee. In the latter case, MEDICARD’s sale of its services is exempt from VAT under Section 109(G).

Gross Receipts of MEDICARD, an HMO, for VAT purposes

For this Court to subject the entire amount of MEDICARD’s gross receipts without exclusion, the authority should have been reasonably founded from the language of the statute. That language is wanting in this case. In the scheme of judicial tax administration, the need for certainty and predictability in the implementation of tax laws is crucial. Our tax authorities fill in the details that Congress may not have the opportunity or competence to provide. The regulations these authorities issue are relied upon by taxpayers, who are certain that these will be followed by the courts. Courts, however, will not uphold these authorities’ interpretations when dearly absurd, erroneous or improper. The CIR’s interpretation of gross receipts in the present case is patently erroneous for lack of both textual and non-textual support.

The Court rules that for purposes of determining the VAT liability of an HMO, the amounts earmarked and actually spent for medical utilization of its members should not be included in the computation of its gross receipts.

MEDICARD v. CIR – On Letter of Authority and Letter Notice


MEDICARD PHILIPPINES, INC., Petitioner, vs. COMMISSIONER OF INTERNAL REVENUE, Respondent; G.R. No. 222743; April 5, 2017


MEDICARD is a Health Maintenance Organization (HMO) that provides prepaid health and medical insurance coverage to its clients. Individuals enrolled in its health care programs pay an annual membership fee and are entitled to various preventive, diagnostic and curative medical services provided by duly licensed physicians, specialists and other professional technical staff participating in the group practice health delivery system at a hospital or clinic owned, operated or accredited by it.

Finding some discrepancies between MEDICARD’s Income Tax Returns (ITR) and VAT Returns, the Commissioner of Internal Revenue (CIR) informed MEDICARD and issued a Letter Notice (LN) No. 122-VT-06-00-00020 dated September 20, 2007. Subsequently, the CIR also issued a Preliminary Assessment Notice (PAN) against MEDICARD for deficiency VAT. On. January 4, 2008, MEDICARD received CIR’s FAN dated December 10, 2007 for alleged deficiency VAT for taxable year 2006 in the total amount of  ₱196,614,476.69, inclusive of penalties. 

According to the CIR, the taxable base of an HMO for VAT purposes is its gross receipts without any deduction under Section 4.108.3(k) of Revenue Regulations (RR) No. 16-2005. Citing Commissioner of Internal Revenue v. Philippine Health Care Providers, Inc., the CIR argued that since MEDICARD. does not actually provide medical and/or hospital services, but merely arranges for the same, its services are not VAT exempt.

On June 19, 2009, MEDICARD received CIR’s Final Decision on Disputed Assessment dated May 15, 2009, denying MEDICARD’s protest.

On July 20, 2009, MEDICARD proceeded to file a petition for review before the Court of Tax Appeals (CTA), reiterating its position before the tax authorities.

Ruling of the CTA Division

On June 5, 2014, the CTA Division rendered a Decision affirming with modifications the CIR’s deficiency VAT assessment covering taxable year 2006. The CTA Division held that:

  1. the determination of deficiency VAT is not limited to the issuance of Letter of Authority (LOA) alone as the CIR is granted vast powers to perform examination and assessment functions;
  2. in lieu of an LOA, an LN was issued to MEDICARD informing it of the discrepancies between its ITRs and VAT Returns and this procedure is authorized under Revenue Memorandum Order (RMO) No. 30-2003 and 42-2003;
  3. MEDICARD is estopped from questioning the validity of the assessment on the ground of lack of LOA since the assessment issued against MEDICARD contained the requisite legal and factual bases that put MEDICARD on notice of the deficiencies and it in fact availed of the remedies provided by law without questioning the nullity of the assessment;
  4. the amounts that MEDICARD earmarked , and eventually paid to doctors, hospitals and clinics cannot be excluded from · the computation of its gross receipts under the provisions of RR No. 4-2007 because the act of earmarking or allocation is by itself an act of ownership and management over the funds by MEDICARD which is beyond the contemplation of RR No. 4-2007;
  5. MEDICARD’s earnings from its clinics and laboratory facilities cannot be excluded from its gross receipts because the operation of these clinics and laboratory is merely an incident to MEDICARD’s main line of business as HMO and there is no evidence that MEDICARD segregated the amounts pertaining to this at the time it received the premium from its members; and
  6. MEDICARD was not able to substantiate the amount pertaining to its January 2006 income and therefore has no basis to impose a 10% VAT rate.

Undaunted, MEDICARD filed a Motion for Reconsideration but it was denied. Hence, MEDICARD elevated the matter to the CTA en banc.

Ruling of the CTA en banc

In a Decision dated September 2, 2015, the CTA en banc partially granted the petition only insofar as the 10% VAT rate for January 2006 is concerned but sustained the findings of the CTA Division in all other matters.


Whether the absence of LOA rendered the assessment void.



An LOA is the authority given to the appropriate revenue officer assigned to perform assessment functions…

Letter of Authority

An LOA is the authority given to the appropriate revenue officer assigned to perform assessment functions. It empowers or enables said revenue officer to examine the books of account and other accounting records of a taxpayer for the purpose of collecting the correct amount of tax. An LOA is premised on the fact that the examination of a taxpayer who has already filed his tax returns is a power that statutorily belongs only to the CIR himself or his duly authorized representatives. 

Based on Section 6 of the NIRC, it is clear that unless authorized by the CIR himself or by his duly authorized representative, through an LOA, an examination of the taxpayer cannot ordinarily be undertaken. The circumstances contemplated under Section 6 where the taxpayer may be assessed through best-evidence obtainable, inventory-taking, or surveillance among others has nothing to do with the LOA. These are simply methods of examining the taxpayer in order to arrive at the correct amount of taxes. Hence, unless undertaken by the CIR himself or his duly authorized representatives, other tax agents may not validly conduct any of these kinds of examinations without prior authority.

In this case, there is no dispute that no LOA was issued prior to the issuance of a PAN and FAN against MEDICARD. Therefore no LOA was also served on MEDICARD. The LN that was issued earlier was also not converted into an LOA as required under  RMO 32-2005. Surprisingly, the CIR did not even dispute the applicability of RMO 32-2005 in the present case which is clear and unequivocal on the necessity of an LOA for the assessment proceeding to be valid. Hence, the CTA’s disregard of MEDICARD’s right to due process warrant the reversal of the assailed decision and resolution.

In the case of Commissioner of Internal Revenue v. Sony Philippines, Inc. , the Court said that:

Clearly, there must be a grant of authority before any revenue officer can conduct an examination or assessment. Equally important is that the revenue officer so authorized must not go beyond the authority given. In the absence of such an authority, the assessment or examination is a nullity.

Letter Notice

The Court cannot convert the LN into the LOA required under the law even if the same was issued by the CIR himself. Under RR No. 12-2002, LN is issued to a person found to have underreported sales/receipts per data generated under the RELIEF system. Upon receipt of the LN, a taxpayer may avail of the BIR’s Voluntary Assessment and Abatement Program. If a taxpayer fails or refuses to avail of the said program, the BIR may avail of administrative and criminal remedies, particularly closure, criminal action, or audit and investigation. Since the law specifically requires an LOA and RMO No. 32-2005 requires the conversion of the previously issued LN to an LOA, the absence thereof cannot be simply swept under the rug, as the CIR would have it. In fact Revenue Memorandum Circular No. 40-2003 considers an LN as a notice of audit or investigation only for the purpose of disqualifying the taxpayer from amending his returns.

LOA versus LN

The following differences between an LOA and LN are crucial. First, an LOA addressed to a revenue officer is specifically required under the NIRC before an examination of a taxpayer may be had while an LN is not found in the NIRC and is only for the purpose of notifying the taxpayer that a discrepancy is found based on the BIR’s RELIEF System. Second, an LOA is valid only for 30 days from date of issue while an LN has no such limitation. Third, an LOA gives the revenue officer only a period of 120 days from receipt of LOA to conduct his examination of the taxpayer whereas an LN does not contain such a limitation.  Simply put, LN is entirely different and serves a different purpose than an LOA. Due process demands, as recognized under RMO No. 32-2005, that after an LN has served its purpose, the revenue officer should have properly secured an LOA before proceeding with the further examination and assessment of the petitioner. Unfortunately, this was not done in this case. Contrary to the ruling of the CTA en banc, an LOA cannot be dispensed with just because none of the financial books or records being physically kept by MEDICARD was examined. To begin with, Section 6 of the NIRC requires an authority from the CIR or from his duly authorized representatives before an examination “of a taxpayer” may be made. The requirement of authorization is therefore not dependent on whether the taxpayer may be required to physically open his books and financial records but only on whether a taxpayer is being subject to examination.

Void Assessment

That the BIR officials herein were not shown to have acted unreasonably is beside the point because the issue of their lack of authority was only brought up during the trial of the case. What is crucial is whether the proceedings that led to the issuance of VAT deficiency assessment against MEDICARD had the prior approval and authorization from the CIR or her duly authorized representatives. Not having authority to examine MEDICARD in the first place, the assessment issued by the CIR is inescapably void.

SPID Corp. vs. Ballesteros – On Just Causes and Illegal Dismissal

the burden of proving that the termination of  an employee was for a just or authorized cause lies with the employer…



On June 5, 2011, Michelle Elvi C. Ballesteros (Ballesteros) received a letter from her employer, Systems and Plan Integrator and Development Corp. (SPID Corp.), informing her of her termination from the service. 

The company alleged that Ballesteros’ employment was  terminated based on her incompetence and inefficiency in the performance of  duties. Also, SPID Corp. lost its confidence and trust in Ballesteros because of  her continued neglect of duty and habitual absences and tardiness.

Ballesteros filed a Complaint for illegal  dismissal, non-payment of wages, service incentive leave pay, 13th month pay,  damages, and attorney’s fees.  

Ruling of the Labor Arbiter

The arbiter dismissed the complaint for  lack of merit, ruling as follows: 

After a perusal of the evidence on hand, we rule that the version of the respondents deserves more credence than that of complainant. This can be gleaned from the various print-outs generated from the respondent company’s biometric-based attendance system where it is shown that in 2010, complainant incurred 203 counts of tardiness/undertime and 4 counts of absences without leave, while in 2011, she incurred 52 counts of tardiness and 7 counts of absences without pay.

While complainant claims that the print-outs are self-serving with no probative value, we are convinced that the biometric-based system of recording employee attendance is tamper-proof and conclusive evidence of an employee’s attendance record[s] since the entries therein are based on the employee’s biometrics or fingerprint.

Ruling of the National Labor Relations Commission

On appeal, the NLRC reversed the LA’s ruling.

Ruling of the Court of Appeals

Based on the foregoing, the NLRC did not commit grave abuse of  discretion amounting to lack or excess of jurisdiction when it ruled that habitual  leave of absences (gross habitual neglect of duty) in 2008; open and willful  disobedience in 2009; and monetary shortage in 2010, resulting in the respondent  company’s loss of trust and confidence, were never substantiated. In the absence  of substantial evidence, the contentions of petitioners are self-serving and  incapable of showing that the dismissal of the private respondent was  justified.


Whether Ballesteros was illegally dismissed.



For a dismissal from employment to be valid, it must be pursuant to either  a just, or an authorized cause, under Articles 297, 298, or 299 of the Labor  Code, as amended. Furthermore, the burden of proving that the termination of  an employee was for a just or authorized cause lies with the employer. If the  employer fails to meet this burden, the dismissal is unjustified, thus, illegal. To discharge this burden, the employer must present substantial evidence,  or the amount of relevant evidence which a reasonable mind might accept as  adequate to justify a conclusion, and not based on mere surmises or  conjectures.

Here, the company dismissed Ballesteros based on three just causes: (a)  habitual leaves of absence or gross habitual neglect of duty; (b) open and willful  disobedience; and ( c) money shortage, thus, loss of trust and confidence.  

Gross and Habitual Neglect of Duty

SPID Corp. dismissed Ballesteros based on gross neglect of duty because  of her habitual leaves of absence, habitual tardiness, and undertime.

Robustan, Inc. v. Court of Appeals1 [G.R. No. 223854; 15 March 2021]  provides the standard for establishing gross neglect of duty as a just cause for  terminating employment: 

Thus, under the Labor Code, to be a valid ground for dismissal, the negligence must be gross and habitual. Gross negligence has been defined as the want or absence of even slight care or diligence as to amount to a reckless disregard of the safety of the person or property. It evinces a thoughtless disregard of consequences without exerting any effort to avoid them. Put differently, gross negligence is characterized by want of even slight care, acting or omitting to act in a situation where there is a duty to act, not inadvertently, but willfully and intentionally with a conscious indifference to consequences insofar as other persons may be affected.

The presentation of the certified true copies of Ballesteros’ leave ledger  does not sufficiently establish the required habituality of neglect that would  merit her dismissal. For one, all the leaves she incurred were deducted from  earned leave credits, meaning, credits she was entitled to over the course of her  work. This Court has held that only habitual absenteeism without leave  constitutes gross negligence. Secondly, such leaves were so few to be  characterized as a reckless disregard for the safety of the company. It could not  be said that she repeatedly neglected her duty for she was only absent for a total  of 12.5 days over the period of six months and a week (January 2008 to July 7,  2008).

As to habitual tardiness, the company failed again to substantiate Ballesteros’ habitual  tardiness and undertime, as the generated print-outs presented to the NLRC  were mere photocopies and unauthenticated. The Court had previously  disregarded unsigned listings and computer printouts presented in evidence by  the employer to prove its employee’s absenteeism and tardiness, holding thus:  

In the case at bar, there is paucity of evidence to establish the charges of absenteeism and tardiness. We note that the employer company submitted mere handwritten listing and computer print-outs. The handwritten listing was not signed by the one who made the same. As regards the print-outs, while the listing was computer generated, the entries of time and other annotations were again handwritten and unsigned.

We find that the handwritten listing and unsigned computer print-outs were unauthenticated and, hence, unreliable. Mere self-serving evidence of which the listing and print-outs are of that nature should be rejected as evidence without any rational probative value even in administrative proceedings.

Similarly, absent reliable and reasonable proof that Ballesteros was indeed  habitually tardy, and habitually incurred undertime for more than 1O days in a  month for six months, the Court cannot conclude that she is guilty of gross and  habitual neglect of duty.

Open and Willful Disobedience

SPID Corp. argues that Ballesteros’ dismissal was due to her open and  willful disobedience of company procedure in the preparation of deposit slips. 

For willful disobedience to be a valid cause for dismissal, these two  elements must concur: (1) the employee’s assailed conduct must have been  willful or intentional, the willfulness being characterized by “a wrongful and  perverse attitude;” and (2) the order violated must have been reasonable, lawful,  made known to the employee, and must pertain to the duties which he had been  engaged to discharge.

The records show no proof that the company made  known to Ballesteros instructions on preparation of deposit slips, except the  February 11, 2009 Memorandum reprimanding her for her negligence. Neither  did the company present proof that Ballesteros’ transgression was coupled with  a wrongful intent, or a wrongful and perverse attitude, both very different from  mere simple negligence, or a mere error in judgment. Again, the burden is on  the employer to present substantial evidence, or the amount of relevant evidence  which a reasonable mind might accept as adequate to justify a conclusion.

Even if the company presented proof of both the instruction, and  Ballesteros’ violation of the instruction, her failure “to text the [ concerned] employee [regarding] their deposit slips while waiting for the scanner to be  fixed” cannot be said to be a product of a wrongful and perverse attitude. It  was merely a momentary lapse of judgment on her part, rather than some design  to circumvent the company’s policy regarding deposit slips.

The requirement of  willfulness or wrongful intent in the appreciation of the aforementioned just  causes, in turn, underscores the intent of the law to reserve only to the gravest  infractions the ultimate penalty of dismissal. It is essential that the infraction  committed by an employee is serious, not merely trivial, and be reflective of a  certain degree of depravity or ineptitude on the employee’s part, in order for the  same to be a valid basis for the termination of his employment. 

Loss of Trust and Confidence

The last ground for Ballesteros’ dismissal is loss of trust and confidence  due to a monetary shortage amounting to ₱1,100.00.

Loss of trust and confidence may be a just case for termination of  employment only upon proof that: (1) the dismissed employee occupied a  position of trust and confidence; and (2) the dismissed employee committed “an  act justifying the loss of trust and confidence.”

The first element was met because Ballesteros, an administrative officer at  the time of her termination, held a position of trust and confidence. Her tasks  included “answering/endorsement of telephone calls, preparation of deposit  slips, handling of petty cash fund, front-lining duties, and other related tasks.” However, the second element, pertaining to the act that breached the company’s  trust and confidence, was never established in the NLRC and CA proceedings.  For loss of trust and confidence to be a valid ground for dismissal, it must be  substantial, and not arbitrary, whimsical, capricious, and concocted. It demands  that a degree of severity attends the employee’s breach of trust.

The Court agrees with the CA that Ballesteros’ monetary shortage in the  amount of ₱1,100.00 cannot be considered substantial and severe, as to justify  the company’s loss of trust and confidence in her. Furthermore, not only did  Ballesteros admit that she was negligent in not counting the money before  returning the same, the amount was even deducted from her salary and returned  to the company. To dismiss Ballesteros over such an insignificant amount  which she duly returned would amount to a clear injustice.

Hence, Ballesteros was illegally terminated.

1. Citing Anvil Ensembles Garment v. Court of Appeals

Villongco v. Yabut – On Disputed Shares and Quorum


The distinction of undisputed or disputed shares of stocks is not provided for in the law or the jurisprudence. Ubi lex non distinguit nee nos distinguere debemus -when the law does not distinguish we should not distinguish…

Carolina Que Villongco v. Cecilia Que Yabut; G.R. No. 225022

Cecilia Que Yabut v. Carolina Que Villongco; G.R. No. 225024


Phil-Ville Development and Housing Corporation (Phil-Ville) is a family corporation founded by Geronima Gallego Que (Geronima) that is engaged in the real estate business. The authorized capital stock of PhilVille is Twenty Million Pesos (₱20,000,000) divided into Two Hundred Thousand (200,000) shares with a par value of One Hundred Pesos (₱l00.00) per share. During her lifetime, Geronima owned 3,140 shares of stock while the remaining 196,860 shares were equally distributed among Geronima’s six children, namely: Carolina Que Villongco, Ana Maria Que Tan, Angelica Que Gonzales, Cecilia Que Yabut, Ma. Corazon Que Garcia, and Maria Luisa Que Camara.

Geronima died on August 31, 2007. By virtue of the Sale of Shares of Stocks dated June 11, 2005 purportedly executed by Cecilia as the attorney-in-fact of Geronima, Cecilia allegedly effected an inequitable distribution of the 3,140 shares that belonged to Geronima.

Accordingly, the distribution of Geronima’s shares in accordance with the Sale of Shares of Stocks was reflected in the General Information Sheets filed by Phil-Ville in 2010 and 2011.

On January 18, 2013, Cecilia, Eumir Carlo Que Camara and Ma. Corazon [Cecilia Que, et. al.] wrote a letter to Ana Maria, Corporate Secretary of Phil-Ville, to send out notices for the holding of the annual stockholders’ meeting. However, before Ana Maria could reply thereto, on January 21, 2013, several letters were sent to Phil-Ville’s stockholders containing a document captioned “Notice of Annual Stockholders’ Meeting” signed by Cecilia and Ma. Corazon as directors.

Thereafter, Carolina, Ana Maria, and Angelica, comprising the majority of the Board of Directors of Phil-Ville held an emergency meeting and made a decision, by consensus, to postpone the annual stockholders’ meeting of Phil-Ville until the issue of the distribution of the 3,140 shares of stocks in the name of certain stockholders is settled. All the stockholders were apprised of the decision to postpone the meeting in a letter dated January 21, 2013. Ana Maria, in her capacity as Corporate Secretary and Director of Phil-Ville likewise gave notice to the Securities and Exchange Commission (SEC) with regard to the postponement of the meeting.

Despite the postponement, however, Cecilia Que, et al. proceeded with the scheduled annual stockholder’s meeting participated only by a few stockholders. In the said meeting, they elected the new members of the Board of Directors and officers of Phil-Ville namely: Cecilia, Ma. Corazon and Eumir, Chairman/Vice President/Treasurer, President/General Manager, and Secretary, respectively.

Meantime, two days prior to the stockholders’ meeting, Carolina, Ana Maria, and Angelica, together with several others, had already filed a Complaint for Annulment of Sale/Distribution or Settlement of Shares of Stock/Injunction against Cecilia, Eumir Carlo and Ma. Corazon. They subsequently filed an Amended and Supplemental Complaint for Annulment of Sale/Distribution or Settlement of Shares of Stock/Annulment of Meeting/Injunction (with Prayer for the Issuance of Temporary Restraining Order and Writ of Preliminary Prohibitory and Mandatory Injunction).

While Civil Case No. CV-940-MN was still pending, on January 15, 2014, Eumir Carlo sent a Notice of Annual Stockholders’ Meeting to all the stockholders of Phil-Ville, notifying them of the setting of the annual stockholders’ meeting on January 25, 2014 at 5:00 P.M. at Max’s Restaurant, Gov. Pascual comer M.H. Del Pilar Streets, Tugatog, Malabon City. During the meeting, Cecilia, Ma. Corazon and Eumir Carlo were elected as directors and later elected themselves to the following positions: Cecilia as Chairperson/Vice President/Treasurer; Ma. Corazon as Vice-Chairperson/ President/General Manager; and Eumir Carlo as Corporate Secretary/Secretary.

Consequently, on February 10, 2014, Carolina, Ana Maria, Angelica, Elaine and Edison Williams [Carolina, et al.] filed the instant election case against Cecilia Que, et al. before the RTC of Malabon City docketed as SEC Case No. 14-001-MN. The Complaint prayed that the election of Cecilia, Ma. Corazon and Eumir Carlo as directors be declared void considering the invalidity of the holding of the meeting at Max’s Restaurant for lack of quorum therein, the questionable manner by which it was conducted, including the invalid inclusion in the voting of the shares of the late Geronima, the questionable validation of proxies, the representation and exercise of voting rights by the alleged proxies representing those who were not personally present at the said meeting, and the invalidity of the proclamation of the winners. Carolina, et al. also questioned the election of Cecilia, Ma. Corazon and Eumir Carlo as officers of the corporation. They likewise prayed that all the actions taken by the petitioners in relation to their election as directors and officers of the corporation be declared void, including but not limited to the filing of the General Information Sheet with the Securities and Exchange Commission on January 27, 2014.

Carolina et. al., claimed that the basis for determining quorum should have been the total number of undisputed shares of stocks of Phil-Ville due to the exceptional nature of the case since the 3,140 shares of the late Geronima and the fractional .67, .67, and .66 shares of Eumir Que Camara; Paolo Que Camara and Abimar Que Camara are the subject of another dispute filed before the RTC. Thus, excluding the 3,142 shares from the 200,000 outstanding capital stock, the proper basis of determining the presence of quorum should be 196,858 shares of stocks.


Whether the disputed shares should be excluded from the basis of quorum.



Section 52 of the Corporation Code states that:

Section 52. Quorum in meetings. – Unless otherwise provided for in this Code or in the by-laws, a quorum shall consist of the stockholders representing a majority of the outstanding capital stock or a majority of the members in the case of non-stock corporations.

While Section 137 of the same Code defines “outstanding capital stock”, thus:

Section 137. Outstanding capital stock defined. – The term “outstanding capital stock”, as used in this Code, means the total shares of stock issued under binding subscription agreements to subscribers or stockholders, whether or not fully or partially paid, except treasury shares.

The right to vote is inherent in and incidental to the ownership of corporate stocks. It is settled that unissued stocks may not be voted or considered in determining whether a quorum is present in a stockholders’ meeting. Only stocks actually issued and outstanding may be voted. Thus, for stock corporations, the quorum is based on the number of outstanding voting stocks. The distinction of undisputed or disputed shares of stocks is not provided for in the law or the jurisprudence. Ubi lex non distinguit nee nos distinguere debemus -when the law does not distinguish we should not distinguish. Thus, the 200,000 outstanding capital stocks of Phil-Ville should be the basis for determining the presence of a quorum, without any distinction.

On Original Document Rule


Under the Original Document Rule, when the subject of inquiry is the contents of a document, writing, photograph or other record, no evidence is admissible other than the original document itself.

Original Document Rule



Petitioner Kuwait Airways Corporation (KAC) is a foreign corporation licensed in the Philippines to engage in the business of air transportation and as such, operates several aircraft as common carriers to and from the Philippines in international trade.  Meanwhile, O’Grady Air Services (OAS) is a foreign entity based in the United Kingdom (UK) and licensed in the Philippines to engage in the business of freight forwarding or transportation of cargo, as a common carrier, to and from Philippine ports through a local agent.

Respondent Tokio Marine and Fire Insurance Co., Ltd. (TMFICL) is an insurance company based in Tokyo, Japan. On the other hand, Tokio Marine Malayan Insurance Co., Inc. (TMMICI), a domestic insurance corporation based in Makati City. According to TMMICI’s claims manager, it is an affiliate of TMFICL and acts as the latter’s settling agent when claims are made on its insurance policies.

On January 6, 2003, Fujitsu Europe Limited (FEL) engaged the services of OAS for the transport of 10 pallets containing crates of STC disk drives from FEL’s address in Slough, Berkshire, UK.  to Fujitsu Computer Products Corporation of the Philippines (FCPCP), the consignee, at the latter’s address in Carmelray Industrial Park, Laguna.  From Slough, the pallets were taken to Heathrow Airport in London, where they were then loaded onto KAC’s aircraft on flights no. KU104/08 and KU411/09. The shipment had a declared value of US$15 8,163.00 and was insured with TMFICL under Open Policy No. 01Ql 1368N.

On January 9, 2003, the shipment arrived at the Ninoy Aquino International Airport (NAIA).  According to a photocopy of MIASCOR Storage and Delivery Receipt No. 251294 dated January 10, 2003, it was noted that one crate had a hole on the side and another was dented.

In a letter dated February 28, 2003, FCPCP’s on-site supevisor at NAIA notified petitioner that they are making a preliminary claim. The cargo was then transported by Japan Cargo Forwarder and Brokerage Corporation (Japan Cargo) to Laguna and were received by FCPCP on January 18, 2003.

FCPCP filed a claim on the insurance policy. TMMICI then hired the services of Toplis Marine Philippines, Inc. (Toplis) to survey the alleged damage. On January 27, 2003 – 18 days after the goods had arrived at NAIA – Toplis sent one of its registered marine and cargo surveyors, Henry F. Barcena, to FCPCP’s premises in Laguna to conduct a survey on the goods. Barcena was shown 32 cartons which he noted to be “deformed/pressed in varying degrees” and was given photocopies of the MIASCOR Storage and Delivery Receipt and the Japan Cargo Delivery Receipt.

In a letter addressed to KAC and dated February 8, 2003, FCPCP formally claimed for US$55,602.00 for the damage sustained by the shipment. This claim was not acted upon, so FCPCP claimed for insurance. Based on the Certificate of Survey, respondent TMMICI paid FCPCP the insurance benefit.  In a Subrogation Receipt dated September 22, 2003, FCPCP acknowledged receipt of US$61,400.70 as insurance indemnity and transferred all its rights and interest on the damaged cargo to respondent TMFICL.

 On January 6, 2005, respondents filed a complaint  before the RTC against OAS, OAS’ unknown local agent, and KAC for US$61,400.70 as actual damages with six percent (6%) legal interest from date of demand, attorney’s fees, and costs of suit.

Ruling of the Regional Trial Court

The RTC held that respondents had failed to discharge their burden of proof, opining that the respondents relied too heavily on the photocopies of the MIASCOR Storage and Delivery Receipt. RTC also pointed out that the receipts were not authenticated as required by Section 5, Rule 130. Respondents’ witnesses did not personally witness the preparation and execution of said receipt nor could they identify the signatures therein. As such, the RTC found no probative value in the receipts. Furthermore, the RTC gave little credence to Barcena’s testimony because he inspected the goods 18 days after it had arrived at the consignee’s premises.

Ruling of the Court of Appeals

The CA reversed the RTC.

In the CA’s appreciation of the evidence, the cargo was in good condition when it was loaded aboard petitioners’ aircraft but already damaged when unloaded.

In direct contradiction to the RTC’s observations, the CA held that the MIASCOR Storage and Delivery Receipt and the Japan Cargo Delivery Receipt indubitably proved the damage. 


Whether the MIASCOR Storage and Delivery Receipt and the Japan Cargo Delivery Receipt are adequate proof of damage to the goods.



Original Document Rule

Under the Original Document Rule (previously called the Best Evidence Rule), when the subject of inquiry is the contents of a document, writing, photograph or other record, no evidence is admissible other than the original document itself.

 In this case, respondents formally offered the MIASCOR Storage and Delivery Receipt and the Japan Cargo Delivery Receipt as proof of their respective contents. As such, the originals should have been presented at trial.

Under Section 4, Rule 130 of the 2019 Rules, however, an original document may consist of a “duplicate” produced by means of photography, mechanical or electronic re-recording, or by other equivalent techniques which accurately reproduce the original. A photocopy of an original, therefore, may consist of a “duplicate” if there is no question that it is an accurate reproduction of the original. But even though this case was tried before the effectivity of the 2019 Rules on Evidence, petitioner had already objected to the admissibility of the MIASCOR Delivery Receipt No. 251294 and Japan Cargo Delivery Receipt No. 124108, arguing that they are secondary evidence because they are mere photocopies.

Under Section 5 of Rule 130, a party is allowed to submit secondary evidence to prove the contents of a lost or destroyed document by a copy, a recital of its contents in some authentic document, or the testimony of witnesses, provided that the offeror of the secondary evidence proves: ( 1) that the original existed and duly executed; (2) it was lost or destroyed; and (3) its unavailability is not due to bad faith on his or her part.

That said, regardless of whether an exhibit is an original, a “duplicate” of a document, or secondary evidence, it must still be presented at trial in the manner provided for by the Rules on Evidence before it can be admitted into evidence. For such purposes, it is important to distinguish between public or private documents. Public documents are admissible in evidence without further proof of their due execution and genuineness.  On the other hand, under Section 20 of Rule 132, a private document cannot be admitted into evidence unless its due execution and authenticity is proven by: (a) anyone who saw the document executed or written; (b) evidence of the genuineness of the handwriting of the maker; or ( c) other evidence showing its due execution and authenticity.

Upon a review of the records, We agree with the RTC’s finding that the MIASCOR Delivery Receipt No. 251294 and Japan Cargo Delivery Receipt No. 124108 were not authenticated as required by Section 20 of Rule 132. Not one of respondents’ three witnesses testified that they saw the receipts – and importantly, the notations of damage – being executed or written.

 As such, the photocopies of said receipts are inadmissible and have no evidentiary value.

Collection of Local and Real Property Taxes Pending Boundary Dispute




Petitioner Uniwide conducted and operated business in buildings and establishments constructed on parcels of land covered by Transfer Certificate of Title (TCT) Nos. 72983, 74003, and PT-74468 (subject properties) issued by the Registry of Deeds of Pasig City. In said TCTs, the location of the parcels of land is indicated as being in Pasig.

In 1989, Uniwide applied for and was issued a building permit by Pasig for its building. Uniwide also secured the requisite Mayor’s Permit for its business from Pasig and consequently paid thereto its business and realty taxes, fees, and other charges from 1989 to 1996.

However, beginning 1997, Uniwide did not file any application for renewal of its Mayor’s Permit in Pasig nor paid the local taxes thereto. Instead, it paid local taxes to Cainta after the latter gave it notice, supported by documentary proof of its claims, that the subject properties were within Cainta’s territorial jurisdiction.

Consequently, Pasig filed a case for collection of local business taxes, fees, and other legal charges due for fiscal year 1997 against Uniwide with the RTC-Pasig on 28 January 1997. Uniwide, in tum, filed a third-party complaint against Cainta for reimbursement of the taxes, fees, and other charges it had paid to the latter in the event that Uniwide was adjudged liable for payment of taxes to Pasig.

Prior to the institution of said tax collection case, Cainta had filed a petition for the settlement of its boundary dispute with Pasig on 30 January 1994, before RTC, Branch 74, Antipolo City (RTC-Antipolo), entitled Municipality of Cainta v. Municipality of Pasig, docketed as Civil Case No. 94-3006. Among the territories disputed in the aforesaid case are the subject properties.

In the course of the trial of the tax collection case, Cainta filed a Motion to Dismiss or Suspend Proceedings on the ground of litis pendentia on 6 November 2001, in view of the pending petition for settlement of the land boundary dispute with Pasig. On 22 January 2002, the RTC-Pasig denied said motion. Cainta moved for reconsideration, but the same was denied in an order dated 7 March 2002.

In its decision dated 30 June 2003, the RTC-Pasig ruled in favor of Pasig. It upheld the indefeasibility of the Torrens title held by Uniwide over the subject properties, whose TCTs indicate that the parcels of land described therein are located within the territorial limits of Pasig. The RTC-Pasig ruled that the location indicated in the TCTs is conclusive for purposes of the action for tax collection, and that any other evidence of location would constitute a collateral attack on a Torrens title proscribed by law. It thus held that Pasig has the right to collect, administer, and appraise business taxes, real estate taxes, and other fees and charges from 1997 up to the present. It ordered Uniwide to pay Pasig local taxes and fees and real estate taxes beginning 1997, as well as attorney’s fees in the amount of ₱500,000.00 plus costs of suit.

On 6 August 2003, Uniwide filed a motion for partial reconsideration of the decision. On 12 August 2003, Cainta also filed a motion for reconsideration. On 30 October 2003, RTC-Pasig issued an omnibus order denying both motions.

In its assailed decision dated 12 July 2006, the CA affirmed the ruling of the RTC-Pasig with modification as to the award of attorney’s fees.

Uniwide and Cainta filed their motion for partial reconsideration and motion for reconsideration, respectively, of the decision. These were denied by the CA in its resolution dated 14 February 2007.


Whether Uniwide was liable for local business and real property taxes to Pasig City despite the boundary dispute between Cainta and Pasig City.



For purposes of complying with local tax liabilities, the taxpayer is entitled to rely on the location stated in the certificate of title.

Under the Local Government Code (LGC), local business taxes are payable for every separate or distinct establishment or place where business subject to the tax is conducted, which must be paid by the person conducting the same.

For real property taxes, Presidential Decree (PD) 464 or the Real Property Tax Code provides that collection is vested in the locality where the property is situated. This is affirmed by Sections 201 and 247 of the Local Government Code.

Since it is clear that local business taxes and realty taxes are to be collected by the local government unit where the business is conducted or the real property is located, the primordial question presented before this Court is: how is location determined for purposes of identifying the LGU entitled to collect taxes.

This Court holds that the location stated in the certificate of title should be followed until amended through proper judicial proceedings.

PD 1529, or the Property Registration Decree (PRD), is an update of the Land Registration Act (Act 496) and relates to the registration of real property. Section 31 thereof provides that a decree of registration, once issued, binds the land and quiets title thereto, and it is conclusive upon and against all persons, including the National Government and all branches thereof.

The land registration court, in confirming the applicant’s title, necessarily passes upon the technical description of the land and consequently its location, based on proof submitted by the applicant and reports by the Commissioner of Land Registration and Director of Lands. There is thus basis to presume correct the location stated in the Certificate of Title and to rely thereon for purposes of determining the situs of local taxation, until it is cancelled or amended.

In Odsique v. Court of Appeals, the Supreme Court held that a certificate of title is conclusive not only of ownership of the land but also its location.

In the case at bar, it is undisputed that the subject properties are covered by TCTs which show on their faces that they are situated in Pasig; that Uniwide’s business establishment is situated within the subject properties; that the stated location has remained unchanged since their issuance; that prior payments of the subject taxes, fees, and charges have been made by Uniwide to Pasig; and that there is no court order directing the amendment of the subject TCTs with regard to the location stated therein. This gives Pasig the apparent right to levy and collect realty taxes on the subject properties and business taxes on the businesses conducted therein. 

Moreover, the Implementing Rules and Regulations (IRR) of the LGC provides that in case of a boundary dispute, the status of the affected area prior to the dispute shall be maintained and continued for all purposes.

It is not controverted that the stated location in the TCTs has remained unchanged since their issuance and that Uniwide has faithfully paid its local business taxes, fees, and other charges to Pasig since 1989, prior to the institution of the boundary dispute case. This status should be maintained until final judgment is rendered and the necessary amendments to the TCTs, if any, are made.

All told, considering that the TCTs show that the subject properties are located in Pasig, Pasig is deemed the LGU entitled to collect local business taxes and realty taxes, as well as relevant fees and charges until an amendment, if any, to the location stated therein is ordered by the land registration court after proper proceedings.

Note: Compare this case with Sta. Lucia v. City of Pasig and Cainta v. Sps. Braña.