SECOND DIVISION
[G.R. No. 132269. April 27, 2000]
HARRISON
MOTORS CORPORATION, petitioner, vs. RACHEL A. NAVARRO, respondent.
D E C I S I O N
BELLOSILLO, J.:
This is a review on certiorari of the
Decision of the Court of Appeals affirming that of the Regional Trial Court of
Makati which ordered petitioner to pay private respondent P32,943.00 as
reimbursement for taxes paid, P7,500.00 as attorney’s fees and the costs
of suit.[1] Sl-xm-is
Sometime in June of 1987 Harrison Motors
Corporation through its president, Renato Claros, sold two (2) Isuzu Elf trucks
to private respondent Rachel Navarro, owner of RN Freight Lines, a franchise
holder operating and maintaining a fleet of cargo trucks all over Luzon.
Petitioner, a known importer, assembler and manufacturer, assembled the two (2)
trucks using imported component parts.[2] Prior to the sale, Renato Claros represented to
private respondent that all the BIR taxes and customs duties for the parts used
on the two (2) trucks had been paid for.[3]
On 10 September 1987 the Bureau of Internal
Revenue (BIR) and the Land Transportation Office (LTO) entered into a Memorandum
of Agreement (MOA) which provided that prior to registration in the LTO of
any assembled or re-assembled motor vehicle which used imported parts, a Certificate
of Payment should first be obtained from the BIR to prove payment of all
taxes required under existing laws.[4]
On 12 October 1987 the Bureau of Customs
(BOC) issued Customs Memorandum Order No. 44-87 promulgating rules,
regulations and procedure for the voluntary payment of duties and taxes on
imported motor vehicles assembled by non-assemblers.[5]
Pursuant to the 10 September 1987 MOA
between the BIR and the LTO, the BIR issued on 18 December 1987 Revenue
Memorandum Order No. 44-87 which provided the procedure governing the
processing and issuance of the Certificate of Payment of internal
revenue taxes for purposes of registering motor vehicles.[6]
On 16 June 1988 the BIR, BOC and LTO entered
into a tripartite MOA which provided that prior to the registration in the LTO
of any locally assembled motor vehicle using imported component parts, a Certificate
of Payment should first be obtained from the BIR and the BOC to prove that
all existing taxes and customs duties have been paid.[7]
In December of 1988 government agents seized
and detained the two (2) Elf trucks of respondent after discovering that there
were still unpaid BIR taxes and customs duties thereon. The BIR and the BOC
ordered private respondent to pay the proper assessments or her trucks would be
impounded.[8] Private respondent went to Claros to ask for the
receipts evidencing payment of BIR taxes and customs duties; however, Claros
refused to comply.[9] Private respondent then demanded from Claros that he
pay the assessed taxes and warned him that he would have to reimburse her
should she be forced to pay for the assessments herself. Her demands were again
ignored. M-issdaa
But wanting to secure the immediate release
of the trucks to comply with her business commitments, private respondent paid
the assessed BIR taxes and customs duties amounting to P32,943.00.[10] Consequently, she returned to petitioner’s office to
ask for reimbursement, but petitioner again refused, prompting her to send a
demand letter through her lawyer.[11] When petitioner still ignored her letter, she filed
a complaint for a sum of money on 24 September 1990 with the Regional Trial
Court of Makati.[12]
On 24 May 1991 private respondent filed a Motion
to Declare Defendant in Default which was granted by the RTC on the same
day.
On 18 November 1991 private respondent filed
a Manifestation and Motion praying for the scheduling of the reception
of her evidence ex-parte since petitioner had not as yet filed a Motion to
Lift Order of Default. Thus, on 22 November 1991 the trial court ordered
the reception of private respondent's evidence ex-parte.[13]
It was only on 2 December 1991 when
petitioner finally filed a Motion to Lift Order of Default. However, on
20 January 1992 the trial court denied petitioner’s motion for its failure to
attach an affidavit of merit showing that it had a valid and meritorious
defense.[14]
On 5 March 1992 the trial court rendered a
decision ordering petitioner to reimburse private respondent in the amount of P32,943.00
for the customs duties and internal revenue taxes the latter had to pay to
discharge her two (2) Elf trucks from government custody. Petitioner was also
required to pay P7,500.00 for attorney’s fees plus the costs.[15]
The Court of Appeals subsequently sustained
the lower court, hence this recourse of petitioner.[16]
Petitioner argues that it was no longer
obliged to pay for the additional taxes and customs duties imposed on the
imported component parts by the Memorandum Orders and the two (2) Memoranda
of Agreement since such administrative regulations only took effect after
the execution of its contract of sale with private respondent. Holding it
liable for payment of the taxes specified in the administrative regulations,
which have the force and effect of laws, would not only violate the
non-impairment clause of the Constitution but also the principle of
non-retroactivity of laws provided in Art. 4 of the Civil Code.[17] Furthermore, petitioner claims that it did pay the
assessed taxes and duties otherwise it would not have been able to secure the
release of such spare parts from the customs and to register the vehicles with
the LTO under its name.
The records however reveal that the Memorandum
Orders and Memoranda of Agreement do not impose any additional BIR
taxes or customs duties.
Customs Memorandum Order No. 44-87 is concerned with the Rules, Regulations and
Procedures in the Payment of Duties and Taxes on Imported Vehicles Locally
Assembled by Non-Assemblers.[18] It does not charge any new tax. It simply provides
the procedure on how owners/consignees or their purchasers could voluntarily
initiate payment for any unpaid customs duties on locally assembled vehicles
using imported component parts.
Neither does BIR Revenue Memorandum Order
No. 44-87[19] exact any tax. It merely outlines the procedure
which governs the processing and issuance of the Certificate of Payment
of internal revenue taxes for purposes of registering motor vehicles with the
LTO. It was passed pursuant to the MOA entered into by the LTO and the BIR on
10 September 1987 implementing Secs. 135-A and 163 of the 1987 National
Internal Revenue Code (NIRC).[20]
It is likewise futile for petitioner to
insist that the MOA executed by the BIR and the LTO on 10 September 1987, and
the tripartite MOA executed by the BIR, LTO and BOC on 16 June 1988 are
administrative regulations prescribing additional taxes.
An examination of the 10 September 1987 MOA
shows that it was executed by the BIR and the LTO to curb the scheme employed
by unscrupulous importers who evade paying the correct taxes and customs duties
on imported vehicles by importing its parts, assembling them locally, and
subsequently selling the finished products to local buyers. The aforementioned
MOA mandated that prior to registration in the LTO of any assembled automobile
using imported parts, a Certificate of Payment should first be obtained
from the BIR which would then transmit the Certificate to the LTO to
prove that all the BIR taxes required under existing laws have been paid.
The 16 June 1988 tripartite MOA among the
BIR, LTO and the BOC virtually contained the same provisions. The MOA provided
that prior to registration with the LTO of any assembled motor vehicle using
imported component parts, a Certificate of Payment should first be
secured from the BIR or the BOC which should then be duly forwarded to LTO. The
Certificate would serve as proof that all taxes and customs duties
required under existing laws, rules and regulations had already been settled.
Clearly, petitioner’s contention is unmeritorious.
What Sec. 10, Art. III, of the Constitution prohibits is the passage of a law
which enlarges, abridges or in any manner changes the intention of the
contracting parties.[21] The Memorandum Orders and the two (2) Memoranda
of Agreement do not impose any additional taxes which would unduly impair
the contract of sale between petitioner and private respondent. Instead, these
administrative regulations were passed to enforce payment of existing BIR taxes
and customs duties at the time of importation.
But who should pay the BIR taxes and customs
duties which the administrative regulations sought to enforce?
Petitioner contends that private respondent
should be the one to pay the internal revenue taxes and customs duties. It
claims that at the time the Memorandum Orders and the two (2) Memoranda
of Agreement took effect the two (2) Elf trucks were already sold to
private respondent, thus, it no longer owned the vehicles. Whatever payments
private respondent made to the government after the sale were solely her
concern and such burden should not be passed on to petitioner.[22] Petitioner further argues that holding it liable for
payment of BIR taxes and customs duties required under the administrative
regulations violates the principle of non-retroactivity of laws under the Civil
Code.
Rtc-spped
Such contention deserves scant
consideration. It is true that administrative rulings and regulations are
generally prospective in nature.[23] An inspection of the two (2) Memoranda of
Agreement however demonstrates that their intent is to enforce payment of
taxes on assemblers/manufacturers who import component parts without paying the
correct assessments. The WHEREAS clause of the 10 September 1987 MOA
clearly illustrates this -
WHEREAS, in order
to avoid or evade the higher taxes on imported motor vehicles, certain persons
import parts and assemble and re-assemble them into complete motor vehicles, or
assemble or re-assemble motor vehicles using imported parts;
While the WHEREAS clause of
the 16 June 1988 MOA provides -
WHEREAS, in order
to avoid or evade the higher taxes on imported motor vehicles, certain persons,
firms or corporations who are non-BOI licensed assemblers of imported motor
vehicle component parts would assemble or re-assemble them into whole unit motor
vehicles;
It is also apparent in Par. 9 of the 16 June
1988 MOA that the taxes to be enforced are designated as
assembler’s/manufacturer’s tax. It states -
9. The BIR shall
collect the assembler’s/manufacturer’s tax, while the BOC shall collect the duties
and taxes and ad valorem tax.
Thus, although private respondent is the one
required by the administrative regulations to secure the Certificate of
Payment for the purpose of registration, petitioner as the importer and the
assembler/manufacturer of the two (2) Elf trucks is still the one liable for
payment of revenue taxes and customs duties. Petitioner’s obligation to pay
does not arise from the administrative regulations but from the tax laws
existing at the time of importation. Hence, even if private respondent already
owned the two (2) trucks when the Memorandum Orders and Memoranda of
Agreement took effect, the fact remains that petitioner was still the one
duty-bound to pay for the BIR taxes and customs duties.
It is also quite obvious that as between
petitioner, who is the importer-assembler/manufacturer, and private respondent,
who is merely the buyer, it is petitioner which has the obligation to pay taxes
to the BIR and the BOC. Petitioner would be unjustly enriched if private
respondent should be denied reimbursement.[24] It would inequitably amass profits from selling
assembled trucks even if it did not pay the taxes due on its imported spare
parts. Imposing the tax burden on private respondent would only encourage the
proliferation of smugglers who scheme to evade taxes by passing on their tax
obligations to their unsuspecting buyers.
In a last ditch effort to exempt itself from
liability, petitioner claims that it had paid the taxes due on the imported
parts otherwise it would not have been able to obtain their release from the
BOC and to register the vehicles with the LTO.
Non-sequitur. The fact that petitioner was able to secure the
release of the parts from customs and to register the assembled trucks with the
LTO does not necessarily mean that all taxes and customs duties were legally
settled. As a matter of fact, the provisions of the two (2) Memoranda of
Agreement clearly establish that the government is aware of the widespread
registration of assembled motor vehicles with the LTO even if the taxes due on
their imported component parts remain unpaid. Paragraph 1 of the 10 September
1987 MOA states -
The LTO shall make
as one of the requirements for the registration of motor vehicles that were
assembled or re-assembled using imported parts, the payment to the BIR of the
taxes required under existing laws.
The same
requirement shall be imposed with respect to the renewal of the registration
of such motor vehicles had they been registered or their registration been
renewed in the past without the payment of the required taxes,
While par. 1 of the 16 June 1988 MOA states
- Scl-aw
The LTO shall make
as one of the requirements for the registration of motor vehicles that were
assembled or re-assembled by non-BOI licensed assemblers using imported component
parts, the payment to the BIR and the BOC of taxes and duties required under
existing laws, rules and regulations;
The same
requirement shall be imposed with respect to the renewal of the registration
of such motor vehicles even if they were already registered or their
registration had been renewed in the past without the payment of the required
taxes.
Obviously, the two (2) Memoranda of
Agreement were executed to prevent the anomalous circumstance, as in the
case at bar, where assembled vehicles are registered with the LTO even if taxes
and customs duties remain unpaid.
Besides, petitioner’s allegation that it
already paid the BIR taxes and customs duties is highly doubtful. This entire
controversy would have been avoided had petitioner simply furnished private
respondent with the receipts evidencing payment of BIR taxes and customs
duties. If only private respondent had the receipts to prove payment of such
assessments then she would have easily secured the release of her two (2) Elf
trucks. But petitioner arbitrarily and unjustly denied private respondent’s
demands. Instead, petitioner obstinately insisted that it was no longer
concerned with the problem involving the two (2) trucks since it no longer
owned the vehicles after the consummation of the sale.
It is true that the ownership of the trucks
shifted to private respondent after the sale. But petitioner must remember that
prior to its consummation it expressly intimated to her that it had already
paid the taxes and customs duties.[25] Such representation shall be considered as a
seller’s express warranty under Art. 1546 of the Civil Code which covers any
affirmation of fact or any promise by the seller which induces the buyer to
purchase the thing and actually purchases it relying on such affirmation or
promise.[26] It includes all warranties which are derived from
express language, whether the language is in the form of a promise or
representation.[27] Presumably, therefore, private respondent would not
have purchased the two (2) Elf trucks were it not for petitioner’s assertion
and assurance that all taxes on its imported parts were already settled.
This express warranty was breached the
moment petitioner refused to furnish private respondent with the corresponding
receipts since such documents were the best evidence she could present to the
government to prove that all BIR taxes and customs duties on the imported
component parts were fully paid. Without evidence of payment, she was powerless
to prevent the trucks from being impounded.
Under Art. 1599 of the Civil Code, once an
express warranty is breached the buyer can accept or keep the goods and
maintain an action against the seller for damages. This was what private
respondent did. She opted to keep the two (2) trucks which she apparently
needed for her business and filed a complaint for damages, particularly seeking
the reimbursement of the amount she paid to secure the release of her vehicles.
WHEREFORE, the Decision of the Court of Appeals dated 22
January 1998 ordering petitioner HARRISON MOTORS CORPORATION to reimburse
private respondent RACHEL A. NAVARRO for the taxes and duties she paid in the
amount of P32,943.00 and to pay her attorney’s fees in the amount of P7,500.00
is AFFIRMED. In addition, the amount of P32,943.00 shall earn interest
at the legal rate from 24 September 1990 when private respondent filed her
complaint with the trial court until fully paid. Costs against petitioner.
SO ORDERED. Sc-lex
Mendoza, Quisumbing, Buena, and De Leon, Jr., JJ., concur.
[1] Decision penned by Justice Oswaldo D. Agcaoili, concurred in by Justice Fidel P. Purisima (now a Member of this Court), and Justice Corona Ibay-Somera, concurring, CA-G.R. CV No. 45237, prom. 22 January 1998; Rollo, pp. 16-21.
[2] Records, p. 78.
[3] Id., p. 49.
[4] Id., p. 20.
[5] Id., p. 23.
[6] Id., p. 24.
[7] Id., p. 26.
[8] Id., p. 78.
[9] Ibid.
[10] Id.,
pp. 56-58. The amount of P32,943.00 represented P13,113.00 for
customs duties on the Isuzu Elf truck with engine number 482325, P13,830.00
for customs duties on Isuzu Elf truck with engine number 486133, and P6,000.00
for BIR taxes for Isuzu Elf truck with engine number 482325.
[11] Id., pp. 59-60.
[12] Id., p. 1.
[13] Id., p. 41.
[14] Id., p. 76.
[15] Decision penned by Judge Buenaventura J. Guerrero (now Associate Justice, Court of Appeals), RTC-Br. 133, Makati; Records, p. 78.
[16] Rollo, p. 21.
[17] Id., p. 12.
[18] Records, p. 23.
[19] Id., p. 24.
[20] SEC. 135-a. Automobiles. - There shall be levied,
assessed and collected an ad valorem tax on automobiles based on the
manufacturer’s or importer’s selling price net of excise taxes, in accordance
with the following schedule: Sd-aad-sc
Engine
Displacement
Tax Rate............Gasoline........................Diesel
5%..................1201
to 1600 cc............1851 to 2050cc
10%..................1601
to 1800cc............2051 to 2250cc
20%..................1801
or over................2251 cc or over
Provided, That in case of imported
automobiles not for sale, the tax imposed herein shall be based on the total
value used by the Bureau of Customs in determining tariff and customs duties,
including customs duty and all other charges, plus 10% of the total thereof.
SEC. 163. Percentage tax on original sales of articles. - There shall be levied, assessed and collected once only on every original sale, barter, exchange, or similar transaction for nominal or valuable consideration intended to transfer ownership of, or title to, the articles herein below enumerated a tax based on the gross selling price or gross value in money of the articles so sold, bartered, exchanged, or transferred, such tax to be paid by the manufacturer, producer or importer x x x x (2) Ten percent (10%) on the following essential articles x x x x (n) Spare parts and accessories of motor vehicles, except tires.
[21] Joaquin, Bernas, Constitution of the Republic of the Philippines, 1987, Vol. 1, p. 322, citing US v. Diaz Conde, 42 Phil 766 (1922)
[22] Rollo, p. 43.
[23] Commissioner of Internal Revenue v. Telefunken Semiconductor Philippines Inc., G.R. No. 103915, 23 October 1995, 249 SCRA 401; ABS-CBN Broadcasting Corporation v. Court of Tax Appeals, G.R. No. 52306, 12 October 1981, 108 SCRA 142.
[24] Art. 22, Civil Code of the Philippines.
[25] Records, p. 78.
[26] Padilla, Ambrosio, Civil Code Annotated, 1987, Vol. V, pp. 316-317.
[27] Tolentino, Arturo, Civil Code of the Philippines, 1992, Vol. V, p. 104.