Legislative Cases Nos. 32-38 - Ej Calaor.docx

32. Basco vs PAGCOR (197 SCRA 52) May 14, 1991 Facts: Petitioner is seeking to annul the Philippine Amusement and Gaming Corporation (PAGCOR) Charter -PD 1869, because it is allegedly contrary to morals, public policy and order, and because it constitutes a waiver of a right prejudicial to a third person with a right recognized by law. It waived the Manila City government’s right to impose taxes and license fees, which is recognized by law. For the same reason, the law has intruded into the local government’s right to impose local taxes and license fees. This is in contravention of the constitutionally enshrined principle of local autonomy. Issue: Whether or not Presidential Decree No. 1869 is valid. Ruling: 1. The City of Manila, being a mere Municipal corporation has no inherent right to impose taxes. Their charter or statute must plainly show an intent to confer that power, otherwise the municipality cannot assume it. Its power to tax therefore must always yield to a legislative act which is superior having been passed upon by the state itself which has the “inherent power to tax.” The Charter of Manila is subject to control by Congress. It should be stressed that “municipal corporations are mere creatures of Congress”, which has the power to “create and abolish municipal corporations” due to its “general legislative powers”. Congress, therefore, has the power of control over the Local governments. And if Congress can grant the City of Manila the power to tax certain matters, it can also provide for exemptions or even take back the power. 2. The City of Manila’s power to impose license fees on gambling, has long been revoked by P.D. No. 771 and vested exclusively on the National Government. Therefore, only the National Government has the power to issue “license or permits” for the operation of gambling. 3. Local governments have no power to tax instrumentalities of the National Government. PAGCOR is government owned or controlled corporation with an original charter, P.D. No. 1869. All of its shares of stocks are owned by the National Government. PAGCOR has a dual role, to operate and to regulate gambling casinos. The latter role is governmental, which places it in the category of an agency or instrumentality of the Government. Being an instrumentality of the Government, PAGCOR should be and actually is exempt from local taxes. Otherwise, its operation might be burdened, impeded or subjected to control by a mere Local Government. 4. Petitioners also argue that the Local Autonomy Clause of the Constitution will be violated by P.D. No. 1869. Article 10, Section 5 of the 1987 Constitution: “Each local government unit shall have the power to create its own source of revenue and to levy taxes, fees, and other charges subject to such guidelines and limitation as the congress may provide, consistent with the basic policy on local autonomy. Such taxes, fees and charges shall accrue exclusively to the local government.”

SC said this is a pointless argument. The power of the local government to “impose taxes and fees” is always subject to “limitations” which Congress may provide by law. Besides, the principle of local autonomy under the 1987 Constitution simply means “decentralization.” It does not make local governments sovereign within the state. Wherefore, the petition is DISMISSED.

33. PAGCOR vs BIR (645 scra 338) March 15, 2011 Facts: The Philippine Amusement and Gaming Corporation (PAGCOR) was created by P.D. No. 1067-A in 1977. Obviously, it is a government owned and controlled corporation (GOCC). In 1998, R.A. 8424 or the National Internal Revenue Code of 1997 (NIRC) became effective. Section 27 thereof provides that GOCC’s are NOT EXEMPT from paying income taxation but it exempted the following GOCCs: 1. GSIS 2. SSS 3. PHILHEALTH 4. PCSO 5. PAGCOR. But in May 2005, R.A. 9337, a law amending certain provisions of R.A. 8424, was passed. Section 1 thereof excluded PAGCOR from the exempt GOCCs hence PAGCOR was subjected to pay income taxation. In September 2005, the Bureau of Internal Revenue issued the implementing rules and regulations (IRR) for R.A. 9337. In the said IRR, it identified PAGCOR as subject to a 10% value added tax (VAT) upon items covered by Section 108 of the NIRC (Sale of Services and Use or Lease of Properties). PAGCOR questions the constitutionality of Section 1 of R.A. 9337 as well as the IRR. PAGCOR avers that the said provision violates the equal protection clause. PAGCOR argues that it is similarly situated with SSS, GSIS, PCSO, and PHILHEALTH, hence it should not be excluded from the exemption. ISSUE: Whether or not PAGCOR should be subjected to income taxation. HELD: Yes. Section 1 of R.A. 9337 is constitutional. It was the express intent of Congress to exclude PAGCOR from the exempt GOCCs hence PAGCOR is now subject to income taxation. PAGCOR’s contention that the law violated the constitution is not tenable. The equal protection clause provides that all persons or things similarly situated should be treated alike, both as to rights conferred and responsibilities imposed. The general rule is, ALL GOCC’s are subject to income taxation. However, certain classes of GOCC’s may be exempt from income taxation based on the following requisites for a valid classification under the principle of equal protection: 1) It must be based on substantial distinctions. 2) It must be germane to the purposes of the law. 3) It must not be limited to existing conditions only. 4) It must apply equally to all members of the class. When the Supreme Court looked into the records of the deliberations of the lawmakers when R.A. 8424 was being drafted, the SC found out that PAGCOR’s exemption was not really based on substantial distinctions. In fact, the lawmakers merely exempted PAGCOR from income taxation upon the request of PAGCOR itself. This was changed however when R.A. 9337 was passed and now PAGCOR is already subject to income taxation. Anent the issue of the imposition of the 10% VAT against PAGCOR, the BIR had overstepped its authority. Nowhere in R.A. 9337 does it state that PAGCOR is subject to VAT. Therefore, that portion of the IRR issued by the BIR is void. In fact, Section 109 of R.A. 9337 expressly exempts PAGCOR from VAT. Further, PAGCOR’s charter exempts it from VAT. To recapitulate, PAGCOR is subject to income taxation but not to VAT.

34. 34. Commissioner of Internal Revenue vs. Metro Star Superama Inc. (637 SCRA 633) December 08, 2010 Facts: In January 2001, a revenue officer was authorized to examine the books of accounts of Metro Star Superama, Inc. In April 2002, after the audit review, the revenue district officer issued a formal assessment notice against Metro Star advising the latter that it is liable to pay P292,874.16 in deficiency taxes. Metro Star assailed the issuance of the formal assessment notice as it averred that due process was not observed when it was not issued a pre-assessment notice. Nevertheless, the Commissioner of Internal Revenue authorized the issuance of a Warrant of Distraint and/or Levy against the properties of Metro Star. Metro Star then appealed to the Court of Tax Appeals (CTA Case No. 7169). The CTA ruled in favor of Metro Star. ISSUE: Whether or not due process was observed in the issuance of the formal assessment notice against Metro Star. HELD: No. It is true that there is a presumption that the tax assessment was duly issued. However, this presumption is disregarded if the taxpayer denies ever having received a tax assessment from the Bureau of Internal Revenue. In such cases, it is incumbent upon the BIR to prove by competent evidence that such notice was indeed received by the addressee-taxpayer. The onus probandi was shifted to the BIR to prove by contrary evidence that the Metro Star received the assessment in the due course of mail. In the case at bar, the CIR merely alleged that Metro Star received the pre-assessment notice in January 2002. The CIR could have simply presented the registry receipt or the certification from the postmaster that it mailed the pre-assessment notice, but failed. Neither did it offer any explanation on why it failed to comply with the requirement of service of the pre-assessment notice. The Supreme Court emphasized that the sending of a pre-assessment notice is part of the due process requirement in the issuance of a deficiency tax assessment,” the absence of which renders nugatory any assessment made by the tax authorities. Taxes are the lifeblood of the government and so should be collected without unnecessary hindrance. But even so, it is a requirement in all democratic regimes that it be exercised reasonably and in accordance with the prescribed procedure.

35. Negros Oriental II Electric Cooperative, Inc. vs. Sangguniang Panlungsod of Dumaguete (155 SCRA 421) November 05, 1987 Facts: In 1985, the Sangguniang Panlungsod (SP) of Dumaguete sought to conduct an investigation in connection with pending legislation related to the operations of public utilities. Invited in the hearing were the heads of NORECO II (Negros Oriental II Electric Cooperative, Inc.) – Paterio Torres and Arturo Umbac. NORECO II is alleged to have installed inefficient power lines in the said city. Torres and Umbac refused to appear before the SP and they alleged that the power to investigate, and to order the improvement of, alleged inefficient power lines to conform to standards is lodged exclusively with the National Electrification Administration (NEA); and neither the Charter of the City of Dumaguete nor the [old] Local Government Code (Batas Pambansa Blg. 337) grants the SP such power. The SP averred that inherent in the legislative functions performed by the respondent SP is the power to conduct investigations in aid of legislation and with it, the power to punish for contempt in inquiries on matters within its jurisdiction. ISSUE: Whether or not LGUs can issue contempt. HELD: No. There is no express provision either in the 1973 Constitution or in the LGC (BP 337) granting local legislative bodies, the power to subpoena witnesses and the power to punish non-members for contempt. Absent a constitutional or legal provision for the exercise of these powers, the only possible justification for the issuance of a subpoena and for the punishment of non-members for contumacious behavior would be for said power to be deemed implied in the statutory grant of delegated legislative power. But, the contempt power and the subpoena power partake of a judicial nature. They cannot be implied in the grant of legislative power. Neither can they exist as mere incidents of the performance of legislative functions. To allow local legislative bodies or administrative agencies to exercise these powers without express statutory basis would run afoul of the doctrine of separation of powers. There being no provision in the LGC explicitly granting local legislative bodies, the power to issue compulsory process and the power to punish for contempt, the SP of Dumaguete is devoid of power to punish the petitioners Torres and Umbac for contempt. The Ad Hoc Committee of said legislative body has even less basis to claim that it can exercise these powers. Even assuming that the SP and the Ad-Hoc Committee had the power to issue the subpoena and the order complained of, such issuances would still be void for being ultra vires. The contempt power (and the subpoena power) if actually possessed, may only be exercised where the subject matter of the investigation is within the jurisdiction of the legislative body.

36. PEOPLE VS. JALOSJOS (324 SCRA 689) February 3, 2000 FACTS: Romeo G. Jalosjos is a full-fledged member of Congress who is now confined at the national penitentiary while his conviction for statutory rape on two counts and acts of lasciviousness on six counts is pending appeal. Jalosjos, filed a motion asking that he be allowed to fully discharge his duties of a Congressman including attendance at legislative sessions and committee meetings despite his having convicted in the first instance including of a non-bailable offense. Jalosjos argument is the mandate of sovereign will which he states that he was re-elected as Congressman of First District of ZAmboanga del Norte by his constituents in order that their voices will be heard and since the accused-appellant is treated as bona fide member of the House of Representatives, the latter urges co-equal branch of government to respect his mandate. ISSUE: Whether or not accused-appellant, Romeo G. Jalosjos, be allowed to discharge his mandate as member of the House of Representatives. HELD: No. The immunity from arrest or detention of Senators or members of the House of Representatives arises from a provision of the Constitution and shows that this privilege has always been granted in a restrictive sense. It is true, that election is the expression of the sovereign power of the people. However, the rights and privileges from being elected as public official may be restricted by law. Privilege has to be granted by law, not inferred from the duties of a position, the higher the rank the greater the requirement of obedience rather than exemption. The accused-appellant Romeo Jalosjos has not given any reason why he should be exempted from the operation of Section 11 Article 6 of the Constitution. The members of Congress cannot compel absent members to attend sessions if the reason for the abuse is a legitimate one. The confinement of a Congressman with a crime punishable with imprisonment by more than (6) six months is not merely authorized by law, has constitutional foundations. Allowing Jalosjos to attend in Congressional sessions and meetings for five (5) days in a week which will make him a free man with all the privileges and would make his status to that of a special class, it also would be a making of the purpose of the correction system.

37. POBRE vs. DEFENSOR-SANTIAGO (597 SCRA 1) August 25, 2009 FACTS: Petitioner Antero Pobre made aware to the court the contents of Senator Miriam Defensor-Santiago’s speech delivered on the senate floor. The following excerpts are the ones in question: XXX “I am not angry. I am irate. I am foaming in the mouth. I am homicidal. I am humiliated, debase, and degraded. And I am not only that I feel like throwing up to be living my middle years in a country of this nature. I am nauseated. I spit on the face of Chief Justice Artemio Panganiban and his cohorts in the Supreme Court, I am no longer interested in the position (of Chief Justice) if I was to be surrounded by idiots. I would rather be in another environment but not in the Supreme Court of Idiots. XXX. According to Pobre, the words of the lady senator were disrespectful and requested that the latter be disbarred or be subjected to disciplinary action. Senator Miriam Defensor-Santiago argued that the statements she made were covered by the constitutional provision on parliamentary immunity, being part of a speech she delivered in the discharge of her duty as member of Congress or its committee. She claims to have made those comments to expose anomalies with regard to the selection process of the Judicial Bar Council for the next Chief Justice. The argument of the respondent is based on the Article VI Section 11 which states that: “A Senator or Member of the House of Representative shall, in all offenses punishable by not more than six years imprisonment, be privileged from arrest while the Congress is in session. No member shall be questioned nor be held liable in any other place for an speech or debate in the Congress or in any committee thereof.” ISSUE: Whether or not Miriam Defensor-Santiago can be charged for her comments on the Judiciary HELD: The Court ruled in favor of Defensor-Santiago in this case. The plea of Senator Santiago for the dismissal of the complaint for disbarment or disciplinary action is well taken. Indeed, her privilege speech is not actionable criminally or in a disciplinary proceeding under the Rules of Court. Despite this, the court feels that the lady senator has gone beyond the limits of decency and good conduct for the statements made which were intemperate and highly improper in substance. The court is not hesitant to impose some form of disciplinary sanctions on her, but the factual and legal circumstances of this case, however, deter the Court from doing so, even without any sign of remorse from her. Petition dismissed.

38. Jimenez vs Cabangbang (17 SCRA 876) August 3, 1966 Facts: On November 14, 1958, defendant Cabangbang published an open letter to thePresident in several newspapers of general circulation in the Philippines. The publication talkedabout the alleged operational plans of the then Secretary of National Defense to launch hispresidential career in 1961 elections. Cabangbang's letter mentioned the names of Nicanor Jimenes and his comrades as subordinates to the 'Planners' behind the alleged operation. Theysued Cabangbang for the crime of libel and sought financial compensation for the damagescaused by the letter. The defendant moved to dismiss the complaint on the grounds that theletter was a privileged form of communication and that it was not libellous. Issue: Whether the contested publication could be classified as a privileged form of communication under the provisions of sec. 15, Article VI of the Constitution. Held: No. Under the provisions of sec. 15, Article VI of the Constitution, "speech or debate therein" only refers to the utterances made by Congress members in the performance of their official duties, such as delivering speeches, making statements, or casting votes in the Congressional hall while the same is in session. It could also refer to the introduction of bills in Congress, whether it is session or not, and other acts performed by Congress members in their official capacity whether there was a session or not, whether inside or outside the premises of one's office. In the case at bar, the Court ruled that Cabangbang's letter cannot be classified as a privileged form of communication because it was published during a time when the Congress was not in session. Moreover, the defendant was not performing his official duty as either a member of Congress when he intended the letter to be published. Therefore, the open letter was not privileged. Because of these reasons, Cabangbang's open letter cannot be classified as a privileged form of communication.