SECOND DIVISION
G.R. No. 132269 April 27, 2000
HARRISON MOTORS CORPORATION, petitioner,
vs.
RACHEL A. NAVARRO, respondent.
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
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.
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 arms and telling her she looked beautiful. The special treatment and sexual advances continued during her employment for four (4) years but she never reciprocated his flirtations, until finally, she noticed that his attitude towards her changed. He made her understand that if she would not give in to his sexual advances he would cause her termination from the service; and he made good his threat when he started harassing her. She just found out one day that her table which was equipped with telephone and intercom units and containing her personal belongings was transferred without her knowledge to a place with neither telephone nor intercom, for which reason, an argument ensued when she confronted William Chua resulting in her being charged with gross disrespect. 11
Respondent Cortez explains, as regards the second charge, that the money entrusted to her for transmittal was not lost; instead, she gave it to the company personnel in-charge for proper transmittal as evidenced by a receipt duly signed by the latter. 12
With respect to the third imputation, private respondent admits that she asked someone to punch-in her time card because at that time she was doing an errand for one of the company's officers, Richard Tan, and that was with the permission of William Chua. She maintains that she did it in good faith believing that she was anyway only accommodating the request of a company executive and done for the benefit of the company with the acquiescence of her boss, William Chua. Besides, the practice was apparently tolerated as the employees were not getting any 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.
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 —
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.1âwphi1.nęt
Mendoza, Quisumbing, Buena and De Leon, Jr., JJ., concur.
Footnotes
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 P600,00 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.
11 Id., pp. 11-12.
12 Id., p. 12.
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.
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