Source: http://lawlibrary.chanrobles.com/index.php?option=com_content&view=article&id=83836:58423&catid=1588&Itemid=566
Timestamp: 2019-04-19 11:00:09+00:00

Document:
G.R. No. 177332, October 01, 2014 - NATIONAL POWER CORPORATION, Petitioner, v. CITY OF CABANATUAN, REPRESENTED BY ITS CITY MAYOR, HON. HONORATO PEREZ, Respondents.
NATIONAL POWER CORPORATION, Petitioner, v. CITY OF CABANATUAN, REPRESENTED BY ITS CITY MAYOR, HON. HONORATO PEREZ, Respondents.
This is a petition for review1 under Rule 45, seeking to annul and set aside the January 15, 2007 decision2 and April 3, 2007 resolution3 of the Court of Appeals in CA-G.R. SP. No. 88377. The questioned decision dismissed petitioner's petition for certiorari and affirmed the October 25, 2004 order4 of the Regional Trial Court of Cabanatuan City (Branch 30) directing the issuance of a writ of execution against petitioner for the satisfaction of the amount of P11,172,479.55, representing the balance of petitioner's franchise tax liabilities plus 25% surcharge from 1992 to 2002. The resolution denied petitioner's motion for reconsideration.
The City of Cabanatuan (the City) assessed the National Power Corporation (NAPOCOR) a franchise tax amounting to P808,606.41, representing 75% of 1% of its gross receipts for 1992. NAPOCOR refused to pay, arguing that it is exempt from paying the franchise tax.5 Consequently, on November 9, 1993, the City filed a complaint6 before the Regional Trial Court of Cabanatuan City, demanding NAPOCOR to pay the assessed tax due plus 25% surcharge and interest of 2% per month of the unpaid tax, and costs of suit.
The sum of P10,000.00 as litigation expenses.
In its April 9, 2003 decision,10 this court affirmed the Court of Appeals' March 12, 2001 decision and July 10, 2001 resolution. In its August 27, 2003 resolution,11 this court denied with finality NAPOCOR's motion for reconsideration.
The City filed an amended motion for execution dated June 29, 2004,20 praying that "a writ of execution be issued by [the] Court directing [NAPOCOR] to pay . . . the amount of P69,751,918.19 without prejudice to the collection of the balance, if any."21 NAPOCOR filed its comment22 again, praying that' the grant of the amended motion be denied and/or suspended pending final resolution of its protest.
NAPOCOR assailed the trial court's order dated October 25, 2004 through a petition for certiorari26 with the Court of Appeals.
On January 15, 2007, the Court of Appeals promulgated the assailed decision dismissing' NAPOCOR's petition for certiorari and affirming the trial court's order. It held that since the franchise tax due was computed yearly, the 25%) surcharge should also be computed yearly based on the total unpaid tax for each particular year.27 The appellate court agreed with the City's reasoning that non-imposition of the surcharge on a cumulative basis would encourage rather than discourage non-payment of taxes.28 In its resolution29 dated April 3, 2007, the Court of Appeals also denied NAPOCOR's motion for reconsideration.
Hence, the present petition for review30 was filed.
In other words, the crucial point to be resolved is what the Court of Appeals meant by "[i]n all cases, to pay a surcharge of 25% of the tax due and unpaid" in the dispositive portion.
[Petitioner] obtained the amount of P2,571,617.14 by getting the 25% of PI0,256,468.57, the total unpaid tax due. Whereas, the [respondent], by further studying the data on record, obtained the 25% of the tax due yearly. The total unpaid tax due for example in year 1992 (P808,606.41) would be added the tax due for 1993 (P821.401.17), obtaining the sum of P1,630,007.58 as unpaid tax due. From this amount of P1,630,007.58 is to be taken the 25% surcharge, giving the amount of P407,501.89 to be added to the amount of P202.151.60, the 25% of the unpaid amount of P80.8,606.41. The same computation was made on the succeeding years up to the year 2002 giving the total amount of the surcharge/penalty of P13,744,096.69.
This Court finds the computation of the [respondent] more in accord with the decision in this case. The [petitioner] was imposed taxes based on the gross receipts yearly. The tax due was computed yearly and therefore, it can be interpreted to mean that the 25% surcharge should also be computed yearly based on the unpaid tax due for each particular year.
The trial court sustained respondent's computation of the surcharge based on the total unpaid tax for each year [proper tax for the year + unpaid tax of the previous year/s], which, in effect, resulted in the imposition of the 25% surcharge for every year of default in the payment of a franchise tax, thereby arriving at the total amount of P13,744,096.69. Petitioner, on the other hand, insists a one-time application of the 25% surcharge based on the total franchise tax due and unpaid (P10,286,468.57 from 1992 to 2002), arriving at the sum of only P2,571,617.14.
Respondent's computation of the surcharge, as sustained by the trial court and the Court of Appeals, varies the terms of the judgment sought to be executed and contravenes Section 168 of the Local Government Code.
There is nothing in the Court of Appeals' decision that would justify the interpretation that the statutory penalty of 25% surcharge should be charged yearly from due date until full payment. If that was the intention of the Court of Appeals, it should have so expressly stated in the dispositive portion of its decision.
Article 1226 of the Civil Code refers to penalties prescribed in contracts, not to penalties embodied in a judgment. We must yield to the specific language of the fallo which is controlling and construe its meaning in the light of the applicable laws.
The fallo says "tax due and unpaid," which simply means tax owing or owed or "tax due that was not paid." The "and" is "a conjunction used to denote a joinder or union, 'binding together,' 'relating the one to the other.'"40 In the context of the decision rendered, there is no ambiguity.
As understood from the common and usual meaning of the conjunction "and," the words "tax due" and "unpaid" are inseparable. Hence, when the taxpayer does not pay its tax due for a particular year, then a surcharge is applied on the full amount of the tax due. However, when the taxpayer makes a partial payment of the tax due, the surcharge is applied only on the balance or the part of the tax due that remains unpaid. It is in this sense that the fallo of the Court of Appeals decision should be read, i.e., a 25% surcharge is to be added to the proper franchise tax so due and unpaid for each year.
It is a fundamental rule that the execution cannot be wider in scope or exceed the judgment or decision on which it is based; otherwise, it has no validity.42 "It is the final judgment that determines and stands as the source of the rights and obligations of the parties."43 In Collector of Internal Revenue v. Gutierrez,44 this court did not allow the collection of the 5% surcharge and 1% monthly interest because the decision sought to be executed did not expressly provide for the payment of the same.
It is the final judgment that determines and stands as the source of the rights and obligations of the parties. The judgment in this case made no pronouncement as to the payment of surcharge and interest, but specifically stated the amount for the payment of which respondents were liable. The Collector by virtue of the writ of execution, may not vary the terms of the judgment by including in his motion for execution the payment of surcharge and interest.
Respondent should have filed an appeal from the judgment or at the least sought clarification insofar as it failed to provide for the payment of the 2% monthly interest. Instead, it erroneously presumed that the surcharge was to be applied yearly with the omission of the payment for monthly interest in the judgment. Hence, respondent alone is to blame and should suffer the consequences of its neglect. With the finality of the Court of Appeals' judgment, all the issues between the parties are deemed resolved and laid to rest. Neither the trial court nor even this court can amend or add to the dispositive portion of a decision that has attained finality.
Section 168 of the Local Government Code categorically provides that the local government unit may impose a surcharge not exceeding 25% of the amount of taxes, fees, or charges not paid on time.
The surcharge is a civil penalty imposed once for late payment of a tax.48 Contrast this with the succeeding provisions on interest, which was imposable at the rate not exceeding 2% per month of the unpaid taxes until fully paid. The fact that the interest charge is made proportionate to the period of delay, whereas the surcharge is not, clearly reveals the legislative intent for the different modes in their application.
A surcharge regardless of how it is computed is already a deterrent. While it is true that imposing a higher amount may be a more effective deterrent, it cannot be done in violation of law and in such a way as to make it confiscatory. We find this reasoning not compelling for us to deviate from the express provisions of Section 168 of the Local Government Code. When a law speaks unequivocally, it is not the province of this court to scan its wisdom or its policy.
If the legislative intent was to make the 25% surcharge proportionate to the period of delay, the law should have provided for the same in clear terms.
Generally, tax statutes are construed strictly against the government and in favor of the taxpayer. 52 "[Statutes levying taxes or duties [are] not to extend their provisions beyond the clear import of the language used";53 and "tax burdens are not to be imposed, nor presumed to be imposed beyond what the statute[s] expressly and clearly [import]. . . ."54 Similarly, we cannot impose a penalty for non-payment of a tax greater than what the law provides.55 To do so would amount to a deprivation of property without due process of law.
The yearly accrual of the 25% surcharge is unconscionable. Respondent's computation of the total tax due plus surcharge is reproduced below for easy reference.
Respondent's yearly imposition of the 25% surcharge, which was sustained by the trial court and the Court of Appeals, resulted in an aggregate penalty that is way higher than petitioner's basic tax liabilities.
Furthermore, it effectively exceeded the prescribed 72% ceiling for interest under Section 168 of the Local Government Code. The law allows the local government to collect an interest at the rate not exceeding 2% per month of the unpaid taxes, fees, or charges including surcharges, until such amount is fully paid. However, the law provides that the total interest on the unpaid amount or portion thereof should not exceed thirty-six (36) months or three (3) years. In other words, respondent cannot collect a total interest on the unpaid tax including surcharge that is effectively higher than 72%. Here, respondent applied the 25% cumulative surcharge for more than three years. Its computation undoubtedly exceeded the 72% ceiling imposed under Section 168 of the Local Government Code. Hence, respondent's computation of the surcharge is oppressive and unconscionable.
We conclude that the trial court committed grave abuse of discretion amounting to lack or excess of jurisdiction in issuing its order dated October 25, 2004, which adopted respondent's computation and effectively varied the terms of the judgment sought to be executed insofar as it imposed a surcharge of P13,744,096.69 on the total tax due (P10,286,468.57) from 1992 to 2002 instead of only P2,571,617.14.
Taxes and its surcharges and penalties cannot be construed in such a way as to become oppressive and confiscatory. Taxes are implied burdens that ensure that individuals and businesses prosper in a conducive environment assured by good and effective government. A healthy balance should be maintained such that laws are interpreted in a way that these burdens do not amount to a confiscatory outcome. Taxes are not and should not be construed to drive businesses into insolvency. To a certain extent, a reasonable surcharge will provide incentive to pay; an unreasonable one delays payment and engages government in unnecessary litigation and expense.
Since it is undisputed that petitioner had already paid the amount of f 12,868,085.7157 (including litigation expenses of P10,000.00) to the City Treasurer of Cabanatuan City, the judgment has accordingly been fully satisfied.
WHEREFORE, the petition is GRANTED and the Court of Appeals decision and resolution dated January 15, 2007 and April 3, 2007 are REVERSED AND SET ASIDE. The order dated October 25, 2004 of the Regional Trial Court of Cabanatuan City, Branch 30, in Civil Case No. 1659 AF granting the writ of execution for the satisfaction of the amount of P11,172,479.55 is ANNULLED AND SET ASIDE.
2 Id. at 53-67. The decision was penned by Associate Justice Arturo G. Tayag and concurred in by Associate Justices Renato C. Dacudao (Chair) and Hakim S. Abdulwahid.
3 Id. at 68-69. The resolution was penned by Associate Justice Arturo G. Tayag, and concurred in by Associate Justices Renato C. Dacudao (Chair) and Hakim S. Abdulwahid.
5 See National Power Corporation v. City of Cabanatuan, G.R. No. 149110, April 9, 2003, 401 SCRA 259, 262 [Per J. Puno, Third Division].
6Rollo, pp. 77-79. The complaint was docketed as Civil Case No. 1659 AF.
10 Id. at 228-255. The case was docketed as G.R. No. 149110. The decision was penned by Associate Justice Reynato S. Puno (Chair) and concurred in by Associate Justices Artemio V. Panganiban, Angelina Sandoval-Gutierrez, Renato C. Corona, and Conchita Carpio Morales.
26 Id. at 33 1-364.
30 The petition was received by the court on May 25, 2007. Respondent filed its comment on October 5, 2007. Subsequently, pursuant to the court's resolution dated June 16, 2008, petitioner and respondent filed their memoranda on August 22, 2008 and September 11, 2008, respectively.
ART. 1226. In obligations with a penal clause, the penalty shall substitute the indemnity for damages and the payment of interests in case of noncompliance, if there is no stipulation to the contrary.
Nevertheless, damages shall be paid if the obligor refuses to pay the penalty or is guilty of fraud in the fulfillment of the obligation.
The penalty may be enforced only when it is demandable in accordance with the provisions of this Code.
40Concurring opinion of J. Castro in Phil. Constitution Association, Inc. v. Mathay, 124 Phil. 890, 924 (1966) [Per J. J.B.L. Reyes, En Banc].
44 108 Phil. 215 (1960) [Per J. Montemayor, En Banc].
45 186 Phil. 563 (1980) [Per J. Abad Santos, Second Division].
48 See the computation of the 25% surcharge in Commissioner of Internal Revenue v. Japan Air Lines, Inc., 279 Phil. 499 (1991) [Per J. Paras, En Banc].
49Philippine Refining Company v. CA, 326 Phil. 680, 691 (1996) [Per J. Regalado, Second Division]. In Jamora v. Meer, 74 Phil. 22 (1942) [Per J. Moran, En Banc], this court ruled: 'Tax laws imposing penalties for delinquencies are clearly intended to hasten tax payments or to punish evasions or neglect of duty in respect thereof. If delays in tax payments are to be condoned for light reasons, the law imposing penalties for delinquencies would be rendered nugatory, and the maintenance of the government and its multifarious activities would be as precarious as tax payers are willing or unwilling to pay their obligations to the state in time. Imperatives of public welfare will not approve of this result."
50See Aguinaldo Industries Corporation v. Commissioner of Internal Revenue, 197 Phil. 822, 832 (1982) [Per J. Plana, First Division].
51 In Republic v. Luzon Industrial Corporation, 102 Phil. 189, 193 (1957) [Per J. Bengzon, En Banc], the appellant requested that the surcharge be reduced in accordance with Article 1154 of the Civil Code that gives the judge power to "equitably modify the penalty when the principal obligation has been partly or irregularly fulfilled by the debtor" in view of its good faith and efforts to pay its obligation on time. The court refused, holding that Article 1154 refers to penalties prescribed in contracts; the law directing the collection of 25% surcharge is mandatory on the collector who has no discretion in the matter; and the court cannot equitably modify the penalty.
52Commissioner of Internal Revenue v. SM Prime Holdings, Inc., G.R. No. 183505, February 26, 2010, 613 SCRA 774, 800 [Per J. Del Castillo, Second Division]; Quimpo v. Mendoza, 194 Phil. 66, 76 (1981) [Per J. Guerrero, First Division].
53Manila Railroad Company v. Insular Collector of Customs, 52 Phil. 950, 952 (1929) [Per J. Malcolm, En Banc].
55 In Paper Industries Corporation of the Philippines (PICOP) v. Court of Appeals, 321 Phil. 1, 29-30 (1995) [Per J. Feliciano, En Banc], this court held that Picop is not liable for surcharge and interest on unpaid transaction tax. According to this court, "the authority to impose what the present Tax Code calls (in Section 248) civil penalties consisting of additions to the tax due, must be expressly given in the enabling statute, in language too clear to be mistaken. The grant of that authority is not lightly to be assumed to have been made to administrative officials, even to one as highly placed as the Secretary of Finance." This court noted that Section 51(c)(l) and (e)(l) and (3) of the 1977 Tax Code authorize the imposition of surcharge and interest only with respect to a "tax imposed by this Title" that is to say, Title II on "Income Tax"; while the 35% transaction tax is imposed by Section 2I0(b) which Section is embraced in Title V on "Taxes on Business" of that Code. While such omission seemed to this court to be an "inadvertent error in legislative draftsmanship," it refrained from filling in such a legislative lacuna.

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