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Keywords: Free Port Association of Subic Bay Freeport Inc. praying that judgment be rendered declaring
Article 2, Section3.1 of the EO 156 unconstitutional and illegal.
HON. EXECUTIVE SECRETARY vs. SOUTHWING HEAVY INDUSTRIES, INC.
Ynares-Santiago, J.: The RTC rendered a summary judgment declaring that Article 2, Section 3.1 of EO 156
constitutes an unlawful usurpation of legislative power vested by the Constitution with
The Consolidated Cases of: Congress and that the proviso is contrary to the mandate of Republic Act 7227(RA 7227)
G.R. No. 164171 February 20, 2006 or the Bases Conversion and Development Act of 1992 which allows the free flow of goods
HON. EXECUTIVE SECRETARY, HON. SECRETARY OF THE DEPARTMENT OF and capital within the Freeport.
TRANSPORTATION AND COMMUNICATIONS (DOTC), COMMISSIONER OF CUSTOMS,
ASSISTANT SECRETARY, LAND TRANSPORTATION OFFICE (LTO), COLLECTOR OF The petitioner appealed in the CA but was denied on the ground of lack of any statutory
CUSTOMS, SUBIC BAY FREE PORT ZONE, AND CHIEF OF LTO, SUBIC BAY FREE PORT basis for the President to issue the same. It held that the prohibition on the importation
ZONE, Petitioners, of use motor vehicles is an exercise of police power vested on the legislature and absent
vs. any enabling law, the exercise thereof by the President through an executive issuance is
SOUTHWING HEAVY INDUSTRIES, INC., represented by its President JOSE T. DIZON, void.
UNITED AUCTIONEERS, INC., represented by its President DOMINIC SYTIN, and
MICROVAN, INC., represented by its President MARIANO C. SONON, Respondents. ISSUES:
1. Whether or not the Private Respondents have the legal standing in questionaing
G.R. No. 164172 February 20, 2006 the said law?
HON. EXECUTIVE SECRETARY, SECRETARY OF THE DEPARTMENT OF 2. Whether or not Article2, Section 3.1 of EO 156 is a valid exercise of the
TRANSPORTATION AND COMMUNICATION (DOTC), COMMISSIONER OF CUSTOMS, President’s quasi-legislative power.
ASSISTANT SECRETARY, LAND TRANSPORTATION OFFICE (LTO), COLLECTOR OF
CUSTOMS, SUBIC BAY FREE PORT ZONE AND CHIEF OF LTO, SUBIC BAY FREE PORT HELD:
ZONE, Petitioners, 1. YES. Petitioners argue that respondents will not be affected by the importation
vs. ban considering that their certificate of registration and tax exemption do not
SUBIC INTEGRATED MACRO VENTURES CORP., represented by its President authorize them to engage in the importation and/or trading of used cars.
YOLANDA AMBAR,Respondent.
The established rule that the constitutionality of a law or administrative issuance can be
G.R. No. 168741 February 20, 2006 challenged by one who will sustain a direct injury as a result of its enforcementhas been
HON. EXECUTIVE SECRETARY, HON. SECRETARY OF FINANCE, THE CHIEF OF THE satisfied in the instant case. The broad subject of the prohibited importation is “all types
LAND TRANSPORTATION OFFICE, THE COMMISSIONER OF CUSTOMS, and THE of used motor vehicles.” Respondents would definitely suffer a direct injury from the
COLLECTOR OF CUSTOMS, SUBIC SPECIAL ECONOMIC ZONE, Petitioners, implementation of EO 156 because their certificate of registration and tax exemption
vs. authorize them to trade and/or import new and used motor vehicles and spare parts,
MOTOR VEHICLE IMPORTERS ASSOCIATION OF SUBIC BAY FREEPORT, INC., except “used cars.” Other types of motor vehicles imported and/or traded by respondents
represented by its President ALFREDO S. GALANG, Respondent. and not falling within the category of used cars would thus be subjected to the ban to the
prejudice of their business. Undoubtedly, respondents have the legal standing to assail
FACTS: This instant consolidated petitions seek to annul the decisions of the Regional the validity of EO 156.
Trial Court which declared Article 2, Section 3.1 of Executive Order 156 unconstitutional.
Said EO 156 prohibits the importation of used vehicles in the country inclusive of the Subic 2. YES BUT
Bay Freeport Zone. Police power is inherent in a government to enact laws, within constitutional limits, to
promote the order, safety, health, morals, and general welfare of society. It is lodged
On December 12, 2002, President Gloria Macapagal Arroyo issued Executive Order 156 primarily with the legislature. By virtue of a valid delegation of legislative power, it may
entitled "Providing for a comprehensive industrial policy and directions for the motor also be exercised by the President and administrative boards, as well as the lawmaking
vehicle development program and its implementing guidelines." The said provision bodies on all municipal levels, including the barangay. Such delegation confers upon the
prohibits the importation of all types of used motor vehicles in the country including the President quasi-legislative power which may be defined as the authority delegated by the
Subic Bay Freeport, or the Freeport Zone, subject to a few exceptions. law-making body to the administrative body to adopt rules and regulations intended to
carry out the provisions of the law and implement legislative policy provided that it must
Consequently, three separate actions for declaratory relief were filed by Southwing Heavy comply with the following requisites:
Industries Inc, Subic Integrated Macro Ventures Corp, and Motor Vehicle Importers
(1) Its promulgation must be authorized by the legislature;
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(2) It must be promulgated in accordance with the prescribed procedure; John Hay Peoples Alternative Coalition, et al. vs. Victor Lim, President, Bases
(3) It must be within the scope of the authority given by the legislature; and Conversion Development Authority (BCDA); John Hay Poro Point Development
(4) It must be reasonable. Corp, City of Baguio, Tuntex Co., Ltd., Asiaworld Internationale Group, Inc., DENR
The first requisite was actually satisfied since EO 156 has both constitutional and G.R. No. 119775, October 24, 2003
statutory bases.
Carpio-Morales, J.:
Anent the second requisite, that the order must be issued or promulgated in accordance
with the prescribed procedure, the presumption is that the said executive issuance duly FACTS: Herein petitioners assail the validity of Presidential Decree No. 420, Series of
complied with the procedures and limitations imposed by law since the respondents 1994, “CREATING AND DESIGNATING A PORTION OF THE AREA COVERED BY THE
never questioned the procedure that paved way for the issuance of EO 156 but instead, FORMER CAMP JOHN [HAY] AS THE JOHN HAY SPECIAL ECONOMIC ZONE PURSUANT
what they challenged was the absence of substantive due process in the issuance of the TO REPUBLIC ACT NO. 7227.” R.A. 7227 is AN ACT ACCELERATING THE CONVERSION OF
EO. MILITARY RESERVATIONS INTO OTHER PRODUCTIVE USES, CREATING THE BASES
CONVERSION AND DEVELOPMENT AUTHORITY FOR THIS PURPOSE, PROVIDING FUNDS
In the third requisite, the Court held that the importation ban runs afoul with the third THEREFOR AND FOR OTHER PURPOSES.
requisite as administrative issuances must not be ultra vires or beyond the limits of the R.A. 7227 provides for the conversion into alternative productive uses of former military
authority conferred. In the instant case, the subject matter of the laws authorizing the bases in the Philippines, such as Clark and Subic military reservations and their
President to regulate or forbid importation of used motor vehicles, is the domestic extensions including John Hay Station (Camp John Hay). RA 7227 created BCDA to carry
industry. EO 156, however, exceeded the scope of its application by extending the out the objectives of the law, and the Subic Special Economic (and Free Port) Zone (Subic
prohibition on the importation of used cars to the Freeport, which RA 7227, considers to SEZ), the metes and bounds of which were to be delineated in a Presidential
some extent, a foreign territory. The domestic industry which the EO seeks to protect is Proclamation.
actually the "customs territory" which is defined under the Rules and Regulations Subic SEZ was granted by R.A. 7227 incentives ranging from tax and duty-free
Implementing RA 7227 which states: "the portion of the Philippines outside the Subic Bay importations, exemption of businesses therein from local and national taxes, to other
Freeport where the Tariff and Customs Code of the Philippines and other national tariff and hallmarks of a liberalized financial and business climate. R.A. No. 7227 expressly gave
customs laws are in force and effect." authority to the President to create, through executive proclamation, subject to the
concurrence of the local government units directly affected, other SEZs in areas such as
Regarding the fourth requisite, the Court finds that the issuance of EO is unreasonable. Camp John Hay.
Since the nature of EO 156 is to protect the domestic industry from the deterioration of BCDA entered into a Joint Venture Agreement with private respondents Tuntex and
the local motor manufacturing firms, the Court however, finds no logic in all the Asiaworld for the development of Poro Poin in La Union and Camp John Hay as premier
encompassing application of the assailed provision to the Freeport Zone which is outside tourist destinations and recreation centers. The Baguio City government passed several
the customs territory of the Philippines. As long as the used motor vehicles do not enter resolutions regarding the actions taken by BCDA. Among these involve the exclusion of
the customs territory, the injury or harm sought to be prevented or remedied will not barangays located within the camp from BCDA’s development programs, a development
arise. program that affords protection to the environment, family-oriented tourist destinations,
priority for Baguio residents in employment opportunities, and liability for local taxes of
The Court finds that Article 2, Section 3.1 of EO 156 is VOID insofar as it is made applicable businesses to be established within the camp. The Sangguniang Panlungsod of Baguio
within the secured fenced-in former Subic Naval Base area but is declared VALID insofar finally passed a resolution supporting P.D. 420 issued by President Ramos, declaring a
as it applies to the customs territory or the Philippine territory outside the presently portion of the camp as a SEZ.
secured fenced-in former Subic Naval Base area as stated in Section 1.1 of EO 97-A (an EO P.D. 420 also declared among others that Camp John Hay SEZ is likewise entitled to all
executed by Pres. Fidel V. Ramos in 1993 providing the Tax and Duty Free Privilege within applicable incentives of SEZ under Section 12 of RA 7227 such as the tax exemptions
the Subic Freeport Zone). Hence, used motor vehicles that come into the Philippine aforementioned. Herein petitioners challenged among others this provision of PD 420 on
territory via the secured fenced-in former Subic Naval Base area may be stored, used or tax exemption for being invalid as it is an unconstitutional exercise by the president of a
traded therein, or exported out of the Philippine territory, but they cannot be imported power granted only to the legislature, and that it violates the rule that taxes should be
into the Philippine territory outside of the secured fenced-in former Subic Naval Base uniform and equitable. Hence, this application to the Supreme Court for temporary
area. restraining order and/or writ of preliminary injunction against respondents for
implementation of PD 420.
Petitions are PARTIALLY GRANTED provided that said provision is declared VALID
insofar as it applies to the Philippine territory outside the presently fenced-in former ISSUES: Whether or not PD 420 is constitutional by providing for national and local tax
Subic Naval Base area and VOID with respect to its application to the secured fenced-in exemption within and granting other economic incentives to John Hay SEZ.
former Subic Naval Base area.
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RULING: NO. The Court observed that nowhere in RA 7227 is there a grant of tax 3. Where part of a statute is void as contrary to the Constitution, while another part is
exemption to SEZs yet to be established in base areas. The tax exemption provision of valid, the valid portion, if separable from the invalid, may stand and be enforced.
Section 12 of RA 7227 only applies exclusively to Subic SEZ, as confirmed by the
deliberations of the Senate during the reading of the bill of RA 7227 with respect to
investment policies that would govern Subic SEZ.
It is clear that under said Section 12, it is only the Subic SEZ which was granted G.R. No. L-69259 January 26, 1988
by Congress with tax exemption, investment incentives and the like. There is no express DELPHER TRADES CORPORATION, and DELPHIN PACHECO, petitioners,
extension of the aforesaid benefits to other SEZs still to be created at the time via
vs.
INTERMEDIATE APPELLATE COURT and HYDRO PIPES PHILIPPINES, INC.,
presidential proclamation. respondents.
While the grant of economic incentives may be essential to the creation and success of
SEZs, free trade zones and the like, the grant thereof to John Hay SEZ cannot be sustained. GUTIERREZ, JR., J.:
The incentives under R.A. 7227 are exclusive only to the Subic SEZ, hence, the extension
of the same to the John Hay SEZ finds no support therein. Neither does the same grant of Delfin Pacheco and his sister, Pelagia Pacheco, were the owners of 27,169 square meters
privileges to the John Hay SEZ find support in the other laws specified under Section 3 of of real estate Identified as Lot. No. 1095, Malinta Estate, in the Municipality of Polo (now
Proclamation No. 420. Valenzuela), Province of Bulacan (now Metro Manila) which is covered by Transfer
Petitioners are correct in concluding that the grant of tax exemption to John Hay SEZ Certificate of Title No. T-4240 of the Bulacan land registry.
contravenes Article VI, Section 28 (4) of the Constitution which provides that “No law The said co-owners leased to Construction Components International Inc. the same
granting any tax exemption shall be passed without the concurrence of a majority of all property and providing that during the existence or after the term of this lease the lessor
the members of Congress.” It is the legislature, unless limited by a provision of the state should he decide to sell the property leased shall first offer the same to the lessee and the
constitution, that has full power to exempt any person or corporation or class of property letter has the priority to buy under similar conditions.
from taxation, its power to exempt being as broad as its power to tax. Other than The lessee Construction Components International, Inc. assigned its rights and
Congress, the Constitution may itself provide for specific tax exemptions, or local obligations under the contract of lease in favor of Hydro Pipes Philippines, Inc. with the
governments may pass ordinances on exemption only from local taxes. The challenged signed conformity and consent of lessors.
grant of tax exemption would circumvent the Constitution’s imposition that a law In January, 1976, a deed of exchange was executed between lessors Delfin and Pelagia
granting any tax exemption must have the concurrence of a majority of all the members Pacheco and defendant Delpher Trades Corporation whereby the former conveyed to the
of Congress. latter the leased property together with another parcel of land also located in Malinta
The claimed statutory exemption of the John Hay SEZ from taxation should be manifest Estate, Valenzuela, Metro Manila for 2,500 shares of stock of defendant corporation with
and unmistakable from the language of the law on which it is based; it must be expressly a total value of P1,500,000.
granted in a statute stated in a language too clear to be mistaken. Tax exemption cannot On the ground that it was not given the first option to buy the leased property pursuant
be implied as it must be categorically and unmistakably expressed. If it were the intent to the proviso in the lease agreement, respondent Hydro Pipes filed an amended
of the legislature to grant to the John Hay SEZ the same tax exemption and incentives complaint for reconveyance of Lot. No. 1095 in its favor under conditions similar to those
given to the Subic SEZ, it would have so expressly provided in the R.A. No. 7227. whereby Delpher Trades Corporation acquired the property from Pelagia Pacheco and
In view of the foregoing, the second sentence of Section 3 of PD 420 is declared NULL AND Delphin Pacheco.
VOID and of no legal force and effect. The remaining provisions thereof remains valid and After trial, the Court of First Instance of Bulacan ruled in favor of the plaintiff.
effective. The judgment is hereby rendered declaring the valid existence of the plaintiffs
preferential right to acquire the subject property. The lower court's decision was affirmed
OTHER THINGS to note in the case (baka maitanong ni sir): on appeal by the Intermediate Appellate Court.
1. When questions of constitutional significance are raised, the court can exercise its The defendants-appellants, now the petitioners, filed a petition for certiorari to review
power of judicial review only if the following requisites are present: (1) the existence of the appellate court's decision.
an actual and appropriate case; (2) a personal and substantial interest of the party raising The court initially denied the petition but upon motion for reconsideration, the court set
the constitutional question; (3) the exercise of judicial review is pleaded at the earliest aside the resolution denying the petition and gave it due course.
opportunity; and (4) the constitutional question is the lis mota of the case. These are The petitioners allege that:
present in the case, thus, SC has jurisdiction to try and decide the case, despite the fact The denial of the petition will work great injustice to the petitioners, in that:
that that RA 7227 actually gives it the jurisdiction to enjoin or restrain implementation of 1. Respondent Hydro Pipes Philippines, Inc, will acquire from petitioners a parcel of
projects for conversion of the base areas. Petitioners also have locus standi to institute industrial land consisting of 27,169 square meters or 2.7 hectares for only P14/sq. meter,
this action as they have real interest over the subject matter. or a total of P380,366, although the prevailing value thereof is approximately P300/sq.
2. The SC can void an act or policy of the political departments of the government on meter or P8.1 Million;
either of two grounds–infringement of the Constitution or grave abuse of discretion. 2. Private respondent is allowed to exercise its right of first refusal even if there is no
"sale" or transfer of actual ownership interests by petitioners to third parties; and
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3. Assuming arguendo that there has been a transfer of actual ownership interests, private A no-par value share does not purport to represent any stated proportionate interest in
respondent will acquire the land not under "similar conditions" by which it was the capital stock measured by value, but only an aliquot part of the whole number of such
transferred to petitioner Delpher Trades Corporation. shares of the issuing corporation. The holder of no-par shares may see from the certificate
itself that he is only an aliquot sharer in the assets of the corporation. But this character
ISSUE: Whether or not the "Deed of Exchange" of the properties executed by the Pachecos of proportionate interest is not hidden beneath a false appearance of a given sum in
on the one hand and the Delpher Trades Corporation on the other was meant to be a money, as in the case of par value shares. The capital stock of a corporation issuing only
contract of sale which, in effect, prejudiced the private respondent's right of first refusal no-par value shares is not set forth by a stated amount of money, but instead is expressed
over the leased property included in the "deed of exchange." to be divided into a stated number of shares, such as, 1,000 shares. This indicates that a
shareholder of 100 such shares is an aliquot sharer in the assets of the corporation, no
HELD: NO. Eduardo Neria, a certified public accountant and son-in-law of the late Pelagia matter what value they may have, to the extent of 100/1,000 or 1/10. Thus, by removing
Pacheco testified that Delpher Trades Corporation is a family corporation; that the the par value of shares, the attention of persons interested in the financial condition of a
corporation was organized by the children of the two spouses (spouses Pelagia Pacheco corporation is focused upon the value of assets and the amount of its debts.
and Benjamin Hernandez and spouses Delfin Pacheco and Pilar Angeles) who owned in Moreover, there was no attempt to state the true or current market value of the real
common the parcel of land leased to Hydro Pipes Philippines in order to perpetuate their estate. Land valued at P300.00 a square meter was turned over to the family's corporation
control over the property through the corporation and to avoid taxes; that in order to for only P14.00 a square meter.
accomplish this end, two pieces of real estate, which had been leased to Hydro Pipes It is to be stressed that by their ownership of the 2,500 no par shares of stock, the
Philippines, were transferred to the corporation; that the leased property was Pachecos have control of the corporation. Their equity capital is 55% as against 45% of
transferred to the corporation by virtue of a deed of exchange of property; that in the other stockholders, who also belong to the same family group.
exchange for these properties, Pelagia and Delfin acquired 2,500 unissued no par value In effect, the Delpher Trades Corporation is a business conduit of the Pachecos. What they
shares of stock which are equivalent to a 55% majority in the corporation because the really did was to invest their properties and change the nature of their ownership from
other owners only owned 2,000 shares; and that at the time of incorporation, he knew all unincorporated to incorporated form by organizing Delpher Trades Corporation to take
about the contract of lease of Lot. No. 1095 to Hydro Pipes Philippines. In the petitioners' control of their properties and at the same time save on inheritance taxes.
motion for reconsideration, they refer to this scheme as "estate planning." As explained by Eduardo Neria:
Under this factual backdrop, the petitioners contend that there was actually no transfer xxx xxx xxx
of ownership of the subject parcel of land since the Pachecos remained in control of the ATTY. LINSANGAN:
property. The transfer of ownership, if anything, was merely in form but not in substance. Q Mr. Neria, from the point of view of taxation, is there any benefit to the spouses
In reality, petitioner corporation is a mere alter ego or conduit of the Pacheco co-owners; Hernandez and Pacheco in connection with their execution of a deed of exchange on the
hence the corporation and the co-owners should be deemed to be the same, there being properties for no par value shares of the defendant corporation?
in substance and in effect an Identity of interest." A Yes, sir.
The petitioners maintain that the Pachecos did not sell the property. They argue that COURT:
there was no sale and that they exchanged the land for shares of stocks in their own Q What do you mean by "point of view"?
corporation. A To take advantage for both spouses and corporation in entering in the deed of exchange.
On the other hand, the private respondent argues that Delpher Trades Corporation is a ATTY. LINSANGAN:
corporate entity separate and distinct from the Pachecos. Thus, it contends that it cannot Q (What do you mean by "point of view"?) What are these benefits to the spouses of this
be said that Delpher Trades Corporation is the Pacheco's same alter ego or conduit; that deed of exchange?
petitioner Delfin Pacheco, having treated Delpher Trades Corporation as such a separate A Continuous control of the property, tax exemption benefits, and other inherent benefits
and distinct corporate entity, is not a party who may allege that this separate corporate in a corporation.
existence should be disregarded. It maintains that there was actual transfer of ownership Q What are these advantages to the said spouses from the point of view of taxation in
interests over the leased property when the same was transferred to Delpher Trades entering in the deed of exchange?
Corporation in exchange for the latter's shares of stock. A Having fulfilled the conditions in the income tax law, providing for tax free exchange of
We rule for the petitioners. property, they were able to execute the deed of exchange free from income tax and
After incorporation, one becomes a stockholder of a corporation by subscription or by acquire a corporation.
purchasing stock directly from the corporation or from individual owners thereof. In the Q What provision in the income tax law are you referring to?
case at bar, in exchange for their properties, the Pachecos acquired 2,500 original A I refer to Section 35 of the National Internal Revenue Code under par. C-sub-par. (2)
unissued no par value shares of stocks of the Delpher Trades Corporation. Consequently, Exceptions regarding the provision which I quote: "No gain or loss shall also be recognized
the Pachecos became stockholders of the corporation by subscription "The essence of the if a person exchanges his property for stock in a corporation of which as a result of such
stock subscription is an agreement to take and pay for original unissued shares of a exchange said person alone or together with others not exceeding four persons gains control
corporation, formed or to be formed." It is significant that the Pachecos took no par value of said corporation."
shares in exchange for their properties.
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Q Did you explain to the spouses this benefit at the time you executed the deed of Subsequently, petitioner issued deficiency documentary stamps tax assessment for the
exchange? year 1984 in the amounts of (a) P464,898.75, corresponding to the amount of automatic
A Yes, sir increase of the sum assured on the policy issued by respondent, and (b) P78,991.25
Q You also, testified during the last hearing that the decision to have no par value share corresponding to the book value in excess of the par value of the stock dividends. Private
in the defendant corporation was for the purpose of flexibility. Can you explain flexibility respondent questioned the deficiency assessments and sought their cancellation in a
in connection with the ownership of the property in question? petition filed in the Court of Tax Appeals which found no valid basis for the deficiency tax
A There is flexibility in using no par value shares as the value is determined by the board assessment on the stock dividends, as well as on the insurance policy. Petitioner appealed
of directors in increasing capitalization. The board can fix the value of the shares the CTA’s decision to the Court of Appeals which affirmed the CTA’s decision insofar as it
equivalent to the capital requirements of the corporation. nullified the deficiency assessment on the insurance policy, but reversed the same with
Q Now also from the point of taxation, is there any flexibility in the holding by the regard to the deficiency assessment on the stock dividends. A motion for reconsideration
corporation of the property in question? of the decision having been denied, both the Commissioner of Internal Revenue and
A Yes, since a corporation does not die it can continue to hold on to the property private respondent appealed to this Court.
indefinitely for a period of at least 50 years. On the other hand, if the property is held by
the spouse the property will be tied up in succession proceedings and the consequential Issue: WON the "automatic increase clause" is separate and distinct from the main
payments of estate and inheritance taxes when an owner dies. agreement and involves another transaction, hence, a deficiency assessment based on the
Q Now what advantage is this continuity in relation to ownership by a particular person additional insurance not covered in the main policy is in order.
of certain properties in respect to taxation?
A The property is not subjected to taxes on succession as the corporation does not die. Held: Yes. It is clear from Section 173 that the payment of documentary stamp taxes is
Q So the benefit you are talking about are inheritance taxes? done at the time the act is done or transaction had and the tax base for the computation
A Yes, sir. of documentary stamp taxes on life insurance policies under Section 183 is the amount
The records do not point to anything wrong or objectionable about this "estate planning" fixed in policy, unless the interest of a person insured is susceptible of exact pecuniary
scheme resorted to by the Pachecos. "The legal right of a taxpayer to decrease the amount measurement. Logically, we believe that the amount fixed in the policy is the figure
of what otherwise could be his taxes or altogether avoid them, by means which the law written on its face and whatever increases will take effect in the future by reason of the
permits, cannot be doubted." "automatic increase clause" embodied in the policy without the need of another contract.
The "Deed of Exchange" of property between the Pachecos and Delpher Trades In the instant case, the additional insurance that took effect in 1984 was an obligation
Corporation cannot be considered a contract of sale. There was no transfer of actual subject to a suspensive obligation, but still a part of the insurance sold to which private
ownership interests by the Pachecos to a third party. The Pacheco family merely changed respondent was liable for the payment of the documentary stamp tax. Finally, it should
their ownership from one form to another. The ownership remained in the same hands. be emphasized that while tax avoidance schemes and arrangements are not prohibited,
Hence, the private respondent has no basis for its claim of a light of first refusal under the tax laws cannot be circumvented in order to evade the payment of just taxes. In the case
lease contract. at bar, to claim that the increase in the amount insured (by virtue of the automatic
WHEREFORE, the instant petition is hereby GRANTED. increase clause incorporated into the policy at the time of issuance) should not be
included in the computation of the documentary stamp taxes due on the policy would be
a clear evasion of the law requiring that the tax be computed on the basis of the amount
insured by the policy.
The records show that NAPOCOR, no less, admits BPPC’s ownership of the machineries
and equipment in the power plant. Likewise, the provisions of the BOT agreement cited
above clearly show BPPC’s ownership. Thus, ownership is not a disputed issue.
Rather than ownership, NAPOCOR’s use of the machineries and equipment is the critical
issue, since its claim under Sec. 234(c) of the LGC is premised on actual, direct and
exclusive use. To support this claim, NAPOCOR characterizes the BOT Agreement as a