1

EN BANC
CONGRESSMAN ENRIQUE
T. GARCIA of the 2nd District of
Bataan,
Petitioner,

G.R. No. 157584

Present:

PUNO, C.J.,
QUISUMBING,
YNARES-SANTIAGO,
CARPIO,
AUSTRIA-MARTINEZ,
CORONA,
- versus CARPIO MORALES,
TINGA,
CHICO-NAZARIO,
VELASCO, JR.,
NACHURA,
LEONARDO-DE CASTRO,
BRION, and
THE EXECUTIVE SECRETARY, PERALTA, JJ.
THE SECRETARY OF THE
DEPARTMENT OF ENERGY,
Promulgated:
CALTEX PHILIPPINES, INC.,
PETRON CORPORATION, and
April 2, 2009
PILIPINAS SHELL
CORPORATION,
Respondents.
x -------------------------------------------------------------------------------------------x
DECISION
BRION, J.:
For the second time, petitioner Enrique T. Garcia, Jr. (petitioner Garcia) asks this Court to
examine the constitutionality of Section 19 of Republic Act No. 8479 (R.A. No. 8479), otherwise known
as the Oil Deregulation Law of 1998) through this petition for certiorari.[1] He raises once again before
us the propriety of implementing full deregulation by removing the system of price controls in the local
downstream oil industry a matter that we have ruled upon in the past.
THE FACTS

After years of imposing significant controls over the downstream oil industry in the Philippines,
the government decided in March 1996 to pursue a policy of deregulation by enacting Republic Act No.
8180 (R.A. No. 8180) or the Downstream Oil Industry Deregulation Act of 1996.
R.A. No. 8180, however, met strong opposition, and rightly so, as this Court concluded in
its November 5, 1997 decision in Tatad v. Secretary of Department of Energy.[2]We struck down the law
as invalid because the three key provisions intended to promote free competition were shown to achieve
the opposite result; contrary to its intent, R.A. No. 8180s provisions on tariff differential, inventory
requirements, and predatory pricing inhibited fair competition, encouraged monopolistic power, and
interfered with the free interaction of market forces. We declared:
R.A. No. 8180 needs provisions to vouchsafe free and fair competition. The need for these vouchsafing
provisions cannot be overstated. Before deregulation, PETRON, SHELL and CALTEX had no real
competitors but did not have a free run of the market because government controls both the pricing and
non-pricing aspects of the oil industry. After deregulation, PETRON, SHELL and CALTEX remain
unthreatened by real competition yet are no longer subject to control by government with respect to their
pricing and non-pricing decisions. The aftermath of R.A. No. 8180 is a deregulated market where
competition can be corrupted and where market forces can be manipulated by oligopolies.[3]

Notwithstanding the existence of a separability clause among its provisions, we struck down R.A. No.
8180 in its entirety because its offensive provisions permeated the whole law and were the principal
tools to carry deregulation into effect.
Congress responded to our Decision in Tatad by enacting on February 10, 1998 a new oil deregulation
law, R.A. No. 8479. This time, Congress excluded the offensive provisions found in the invalidated law.
Nonetheless, petitioner Garcia again sought to declare the new oil deregulation law unconstitutional on
the ground that it violated Article XII, Section 19 of the Constitution. [4] He specifically objected to
Section 19 of R.A. No. 8479 which, in essence, prescribed the period for removal of price control on
gasoline and other finished petroleum products and set the time for the full deregulation of the local
downstream oil industry. The assailed provision reads:
SEC. 19. Start of Full Deregulation. Full deregulation of the Industry shall start five (5) months
following the effectivity of this Act: Provided, however, That when the public interest so requires, the
President may accelerate the start of full deregulation upon the recommendation of the DOE and the
Department of Finance (DOF) when the prices of crude oil and petroleum products in the world market
are declining and the value of the peso in relation to the US dollar is stable, taking into account relevant
trends and prospects; Provided, further, That the foregoing provision notwithstanding, the five (5)-month
Transition Phase shall continue to apply to LPG, regular gasoline and kerosene as socially-sensitive
petroleum products and said petroleum products shall be covered by the automatic pricing mechanism
during the said period.
Upon the implementation of full deregulation as provided herein, the Transition Phase is deemed
terminated and the following laws are repealed:
a)

Republic Act No. 6173, as amended;

b)

Section 5 of Executive Order No. 172, as amended;

c)

Letter of Instruction No. 1431, dated October 15, 1984;

d)

Letter of Instruction No. 1441, dated November 20, 1984, as amended;

e)

Letter of Instruction No. 1460, dated May 9, 1985;

f)

Presidential Decree No. 1889; and

g)

Presidential Decree No. 1956, as amended by Executive Order No. 137:

Provided, however, That in case full deregulation is started by the President
in the exercise of the authority provided in this Section, the foregoing laws shall
continue to be in force and effect with respect to LPG, regular gasoline and
kerosene for the rest of the five (5)-month period.

Petitioner Garcia contended that implementing full deregulation and removing price control at a
time when the market is still dominated and controlled by an oligopoly [5]would be contrary to public
interest, as it would only provide an opportunity for the Big 3 to engage in price-fixing and
overpricing. He averred that Section 19 of R.A. No. 8479 is glaringly pro-oligopoly, anti-competition,
and anti-people, and thus asked the Court to declare the provision unconstitutional.
On December 17, 1999, in Garcia v. Corona (1999 Garcia case),[6] we denied petitioner Garcias
plea for nullity. We declined to rule on the constitutionality of Section 19 of R.A. No. 8479 as we found
the question replete with policy considerations; in the words of Justice Ynares-Santiago, the ponente of
the 1999 Garcia case:
It bears reiterating at the outset that the deregulation of the oil industry is a policy determination of
the highest order. It is unquestionably a priority program of Government. The Department of Energy Act
of 1992 expressly mandates that the development and updating of the existing Philippine energy program
shall include a policy direction towards deregulation of the power and energy industry.
Be that as it may, we are not concerned with whether or not there should be
deregulation. This is outside our jurisdiction. The judgment on the issue is a settled matter and only
Congress can reverse it.
xxx xxx xxx
Reduced to its basic arguments, it can be seen that the challenge in this petition is not against the
legality of deregulation. Petitioner does not expressly challenge deregulation. The issue, quite simply, is
the timeliness or the wisdom of the date when full deregulation should be effective.
In this regard, what constitutes reasonable time is not for judicial determination. Reasonable
time involves the appraisal of a great variety of relevant conditions, political, social and economic. They
are not within the appropriate range of evidence in a court of justice. It would be an extravagant extension
of judicial authority to assert judicial notice as the basis for the determination. [Emphasis supplied.]

Undaunted, petitioner Garcia is again before us in the present petition for certiorari seeking a
categorical declaration from this Court of the unconstitutionality of Section 19 of R.A. No. 8479.
THE PETITION

Petitioner Garcia does not deny that the present petition for certiorari raises the same issue of the
constitutionality of Section 19 of R.A. No. 8479, which was already the subject of the 1999 Garcia
case. He disagrees, however, with the allegation that the prior rulings of the Court in the two oil
deregulation cases[7] amount to res judicata that would effectively bar the resolution of the present
petition. He reasons that res judicata will not apply, as the earlier cases did not completely resolve the
controversy and were not decided on the merits. Moreover, he maintains that the present case involves a
matter of overarching and overriding importance to the national economy and to the public and cannot
be sacrificed for technicalities like res judicata.[8]
To further support the present petition, petitioner Garcia invokes the following additional grounds
to nullify Section 19 of R.A. No. 8479:
1. Subsequent events after the lifting of price control in 1997 have confirmed the continued
existence of the Big 3 oligopoly and its overpricing of finished petroleum products;
2. The unabated overpricing of finished petroleum products by the Big 3 oligopoly is gravely
and undeniably detrimental to the public interest;
3. No longer may the bare and blatant constitutionality of the lifting of price control be glossed
over through the expediency of legislative wisdom or judgment call in the face of the Big 3
oligopolys characteristic, definitive, and continued overpricing;
4. To avoid declaring the lifting of price control on finished petroleum products as
unconstitutional is to consign to the dead letter dustbin the solemn and explicit constitutional
command for the regulation of monopolies/oligopolies.[9]
THE COURTS RULING
We resolve to dismiss the petition.
In asking the Court to declare Section 19 of R.A. No. 8479 as unconstitutional for contravening Section
19, Article XII of the Constitution, petitioner Garcia invokes the exercise by this Court of its power of
judicial review, which power is expressly recognized under Section 4(2), Article VIII of the
Constitution.[10] The power of judicial review is the power of the courts to test the validity of executive
and legislative acts for their conformity with the Constitution. [11] Through such power, the judiciary
enforces and upholds the supremacy of the Constitution.[12] For a court to exercise this power, certain
requirements must first be met, namely:
(1) an actual case or controversy calling for the exercise of judicial power;
(2) the person challenging the act must have standing to challenge; he must have a personal
and substantial interest in the case such that he has sustained, or will sustain, direct
injury as a result of its enforcement;
(3) the question of constitutionality must be raised at the earliest possible opportunity; and
(4) the issue of constitutionality must be the very lis mota of the case.[13]

Actual Case Controversy

Susceptible of Judicial Determination
The petition fails to satisfy the very first of these requirements the existence of an actual case or
controversy calling for the exercise of judicial power. An actual case or controversy is one that involves
a conflict of legal rights, an assertion of opposite legal claims susceptible of judicial resolution; the
case must not be moot or academic or based on extra-legal or other similar considerations not
cognizable by a court of justice. Stated otherwise, it is not the mere existence of a conflict or
controversy that will authorize the exercise by the courts of its power of review; more importantly, the
issue involved must be susceptible of judicial determination. Excluded from these are questions of
policy or wisdom, otherwise referred to as political questions:
As Taada v. Cuenco puts it, political questions refer to those questions which, under the
Constitution, are to be decided by the people in their sovereign capacity, or in regard to whichfull
discretionary authority has been delegated to the legislative or executive branch of government. Thus, if
an issue is clearly identified by the text of the Constitution as matters for discretionary action by a
particular branch of government or to the people themselves then it is held to be a political question. In
the classic formulation of Justice Brennan in Baker v. Carr, [p]rominent on the surface of any case held to
involve a political question is found a textually demonstrable constitutional commitment of the issue to a
coordinate political department; or a lack of judicially discoverable and manageable standards for
resolving it; or the impossibility of deciding without an initial policy determination of a kind clearly for
non-judicial discretion; or the impossibility of a courts undertaking independent resolution without
expressing lack of the respect due coordinate branches of government; or an unusual need for
unquestioning adherence to a political decision already made; or the potentiality of embarrassment from
multifarious pronouncements by various departments on the one question.[14][Emphasis supplied.]

Petitioner Garcias issues fit snugly into the political question mold, as he insists that by adopting a
policy of full deregulation through the removal of price controls at a time when an oligopoly still exists,
Section 19 of R.A. No. 8479 contravenes the Constitutional directive to regulate or prohibit
monopolies[15] under Article XII, Section 19 of the Constitution. This Section states:
The State shall regulate or prohibit monopolies when the public interest so requires. No
combinations in restraint of trade or unfair competition shall be allowed.

Read correctly, this constitutional provision does not declare an outright prohibition of
monopolies. It simply allows the State to act when public interest so requires; even then, no outright
prohibition is mandated, as the State may choose to regulate rather than to prohibit. Two elements must
concur before a monopoly may be regulated or prohibited:
1. There in fact exists a monopoly or an oligopoly, and
2. Public interest requires its regulation or prohibition.
Whether a monopoly exists is a question of fact. On the other hand, the questions of (1) what public
interest requires and (2) what the State reaction shall be essentially require the exercise of discretion on
the part of the State.
Stripped to its core, what petitioner Garcia raises as an issue is the propriety of immediately and
fully deregulating the oil industry. Such determination essentially dwells on the soundness or wisdom

of the timing and manner of the deregulation Congress wants to implement through R.A. No.
8497. Quite clearly, the issue is not for us to resolve; we cannot rule on when and to what extent
deregulation should take place without passing upon the wisdom of the policy of deregulation that
Congress has decided upon. To use the words of Baker v. Carr,[16] the ruling that petitioner Garcia asks
requires an initial policy determination of a kind clearly for non-judicial discretion; the branch of
government that was given by the people the full discretionary authority to formulate the policy is the
legislative department.
Directly supporting our conclusion that Garcia raises a political question is his proposal to adopt
instead a system of partial deregulation a system he presents as more consistent with the Constitutional
dictate. He avers that free market forces (in a fully deregulated environment) cannot prevail for as long
as the market itself is dominated by an entrenched oligopoly. In such situation, he claims that prices are
not determined by the free play of supply and demand, but instead by the entrenched and dominant
oligopoly where overpricing and price-fixing are possible.[17] Thus, before full deregulation can be
implemented, he calls for an indefinite period of partial deregulation through imposition of price
controls.[18]
Petitioner Garcias thesis readily reveals the political, [19] hence, non-justiciable, nature of his
petition; the choice of undertaking full or partial deregulation is not for this Court to make. By enacting
the assailed provision Section 19 of R.A. No. 8479, Congress already determined that the problems
confronting the local downstream oil industry are better addressed by removing all forms of prior
controls and adopting a deregulated system. This intent is expressed in Section 2 of the law:
Section 2. Declaration of Policy. It shall be the policy of the State to liberalize and deregulate the
downstream oil industry in order to ensure a truly competitive market under a regime of fair prices,
adequate and continuous supply of environmentally-clean and high-quality petroleum products. To this
end, the State shall promote and encourage the entry of new participants in the downstream oil industry,
and introduce adequate measures to ensure the attainment of these goals.

In Tatad, we declared that the fundamental principle espoused by Section 19, Article XII of the
Constitution is competition.[20] Congress, by enacting R.A. No. 8479, determined that this objective is
better realized by liberalizing the oil market, instead of continuing with a highly regulated system
enforced by means of restrictive prior controls. This legislative determination was a lawful exercise of
Congress prerogative and one that this Court must respect and uphold. Regardless of the individual
opinions of the Members of this Court, we cannot, acting as a body, question the wisdom of a co-equal
departments acts. The courts do not involve themselves with or delve into the policy or wisdom of a
statute;[21] it sits, not to review or revise legislative action, but to enforce the legislative will. [22] For the
Court to resolve a clearly non-justiciable matter would be to debase the principle of separation of
powers that has been tightly woven by the Constitution into our republican system of government.
This same line of reasoning was what we used when we dismissed the first Garcia case. The
petitioner correctly noted that this is not a matter of res judicata (as the respondents invoked), as the
application of the principle of res judicata presupposes that there is a final judgment or decree on the
merits rendered by a court of competent jurisdiction. To be exact, we are simply declaring that then, as

now, and for the same reasons, we find that there is no justiciable controversy that would justify the
grant of the petition.
Grave Abuse of Discretion
Recourse to the political question doctrine necessarily raises the underlying doctrine of
separation of powers among the three great branches of government that our Constitution has
entrenched. But at the same time that the Constitution mandates this Court to respect acts performed by
co-equal departments done within their sphere of competence and authority, it has also allowed us to
cross the line of separation on a very limited and specific point to determine whether the acts of the
executive and the legislative departments are null because they were undertaken with grave abuse of
discretion. IBP v. Zamora teaches us that When political questions are involved, the Constitution limits the determination as to whether
there has been grave abuse of discretion amounting to lack or excess of jurisdiction on the part of the
official whose action is being questioned.
xxx xxx xxx
[W]hile this Court has no power to substitute its judgment for that of Congress or of the President,
it may look into the question of whether such exercise has been made in grave abuse of discretion. A
showing that plenary power is granted either department of government, may not be an obstacle to judicial
inquiry, for the improvident exercise or abuse thereof may give rise to justiciable
controversy. [23] [Emphasis supplied.]

Jurisprudence has defined grave abuse of discretion to mean the capricious or whimsical exercise
of judgment that is so patent and gross as to amount to an evasion of positive duty or a virtual refusal to
perform a duty enjoined by law, or to act at all in contemplation of law, as where the power is exercised
in an arbitrary and despotic manner by reason of passion or hostility.[24]
Significantly, the pleadings before us fail to disclose any act of the legislature that may be
characterized as patently capricious or whimsical. A reading of the congressional deliberations made
on R.A. No. 8479 indicates that the measure was thoroughly and carefully considered. Indeed,
petitioner Garcia was among the many who interpellated the laws principal author, then Congressman
Dante O. Tinga, now a Member of this Court.
We note, too, that petitioner Garcia has not adequately proven at this point that an oligopoly does
in fact exist in the form of the Big 3, and that the Big 3 have actually engaged in oligopolistic
practices. He merely cites (in his argument against the applicability of res judicata) and relies on the
facts and findings stated in the two prior cases on oil deregulation. This calls to mind what former Chief
Justice Panganiban said in his Separate Opinion in the 1999 Garcia case:
Petitioner merely resurrects and relies heavily on the arguments, the statistics and the proofs he
submitted two years ago in the first oil deregulation case, Tatad v. Secretary of the Department of
Energy. Needless to state, those reasons were taken into consideration in said case, and they indeed
helped show the unconstitutionality of RA 8180. But exactly the same old grounds cannot continue
to support petitioners present allegation that the major oil companies -- Petron, Shell and Caltex --

persist to this date in their oligopolistic practices, as a consequence of the current Oil Deregulation
Law and in violation of the Constitution. In brief, the legal cause and effect relationship has not been
amply shown. [Emphasis supplied.]

This observation is true in the present case as it was true in the 1999 Garcia case; the petitioner
has simply omitted the citation of facts, figures and statistics specifically supporting his petition. To
prove charges of continued overpricing or price-fixing, he refers to data showing price adjustments of
petroleum products for the period coveringFebruary 8, 1997 to August 1, 1997. Insofar as R.A.
No. 8479 is concerned, however, these data are irrelevant, as they cover a period way before R.A.
No. 8479 was enacted.[25]
Petitioner Garcia contends that the identity in the pricing patterns of the Big 3 confirms the
existence of an oligopoly and shows that they have colluded to engage in unlawful cartel-like
behaviour. His reasoning fails to persuade us. That the oil firms have the same prices and change them
at the same rate at the same time are not sufficient evidence to conclude that collusion exists. An
independent study on local oil prices explains:
[W]hen products are highly substitutable with each other (or what economists call homogeneous
products), then firms will tend to set similar prices, especially when there are many competing
sellers. Otherwise, if one firm tried to set a price significantly higher than the others, it would find itself
losing customers to the others.[26]

Even assuming that the Big 3 have indeed colluded in fixing oil prices, this development will not
necessarily justify a declaration against the validity and constitutionality of Section 19 of R.A.
No. 8479. The remedy against the perceived failure of the Oil Deregulation Law to combat cartelization
is not to declare it invalid, but to set in motion its anti-trust safeguards under Sections 11, [27] 12,[28] and
13.[29]
Lis Mota
Lis Mota the fourth requirement to satisfy before this Court will undertake judicial review means
that the Court will not pass upon a question of unconstitutionality, although properly presented, if the
case can be disposed of on some other ground, such as the application of the statute or the general
law. The petitioner must be able to show that the case cannot be legally resolved unless the
constitutional question raised is determined. [30] This requirement is based on the rule that every law has
in its favor the presumption of constitutionality; [31] to justify its nullification, there must be a clear and
unequivocal breach of the Constitution, and not one that is doubtful, speculative, or argumentative.
Petitioner Garcia argues against full deregulation implemented through the lifting of price
control, as it allows oligopoly, overpricing and price-fixing. R.A. No. 8479, however, does not condone
these acts; indeed, Section 11 (a) of the law expressly prohibits and punishes cartelization, which is
defined in the same section as any agreement, combination or concerted action by refiners, importers
and/or dealers, or their representatives, to fix prices, restrict outputs or divide markets, either by
products or by areas, or allocate markets, either by products or by areas, in restraint of trade or free
competition, including any contractual stipulation which prescribes pricing levels and profit
margins.This definition is broad enough to include the alleged acts of overpricing or price-fixing by the

Big 3. R.A. No. 8479 has provided, aside from prosecution for cartelization, several other anti-trust
mechanisms, including the enlarged scope of the Department of Energys monitoring power and the
creation of a Joint Task Force to immediately act on complaints against unreasonable rise in the price of
petroleum products.[32] Petitioner Garcias failure is that he failed to show that he resorted to these
measures before filing the instant petition. His belief that these oversight mechanisms are unrealistic
and insufficient does not permit disregard of these remedies.[33]
CONCLUSION
To summarize, we declare that the issues petitioner Garcia presented to this Court are nonjusticiable matters that preclude the Court from exercising its power of judicial review. The immediate
implementation of full deregulation of the local downstream oil industry is a policy determination by
Congress which this Court cannot overturn without offending the Constitution and the principle of
separation of powers. That the law failed in its objectives because its adoption spawned the evils
petitioner Garcia alludes to does not warrant its nullification. In the words of Mr. Justice Leonardo A.
Quisumbing in the 1999 Garcia case, [a] calculus of fear and pessimism xxx does not justify the remedy
petitioner seeks: that we overturn a law enacted by Congress and approved by the Chief Executive.[34]
WHEREFORE, we hereby DISMISS the petition. No pronouncements as to costs.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 79307 August 29, 1989
COMMISSIONER OF CUSTOMS, petitioner,
vs.
THE HON. RAMON P. MAKASIAR, RTC Judge, Branch 35, Manila and THE DISTILLERS CO. LTD. OF
ENGLAND, respondents.
Quasha, Asperilla, Ancheta, Pena & Nolasco for private respondent.

CORTES, J.:
Petitioner Commissioner of Customs seeks the reversal of respondent judge's decision dated 20 July 1987 in Civil Case No.
82-12821 entitled "The Distillers Co. Ltd., of England v. Victorio Francisco, et al.," the dispositive portion of which reads as
follows:
WHEREFORE, having been issued by the Collector of Customs in excess of his jurisdiction the disputed
Warrant of Seizure and Detention dated January 2, 1979, in Seizure Identification No. 2-79 of the Bureau of
Customs, as well as all the proceedings taken thereon are declared NULL and VOID, and the writ of

10
prohibition prayed for is GRANTED. The public respondent is ordered to REFRAIN and DESIST from
conducting any proceedings for the seizure and forfeiture of the articles in question until after the Court having
taken cognizance and legal custody thereof has rendered its final judgment in the criminal cases which
involve the same articles. Without costs.
SO ORDERED. [RTC Decision, p. 7; Rollo, p. 26].
The undisputed acts are as follows:
On 7 December 1978, the then Court of First Instance of Manila (herein referred to as CFI-MANILA) issued Search and
Seizure Warrants in Criminal Case Nos. 8602 and 8603 entitled "People of the Philippines vs. Howard J. Sosis,, et al.," for
violation of Section 11 (a) and/or 11(e) of Republic Act No. 3720, * and violation of Article 188 of the Revised Penal Code (captioned as "Substituting
and altering trademarks, tradenames, or service marks"), respectively, and ordering the seizure of the following:

a) Materials:
All whisky, bottles, labels, caps, cartons, boxes, machinery equipment or other materials used or intended to
be used, or suitable for use, in connection with counter-feiting or imitation of Johnnie Walker Scotch Whisky
(Emphasis supplied)
b) Documents:
xxx
under the control and possession of:
1. Howard J. Sosis
2. George Morrison Lonie
3. Hercules Bottling Co.
4. Lauro Villanueva
5. Vicente Velasco
6. Manuel Esteban
7. Eugenio Mauricio
[Rollo, pp. 106-107].
On 8 December 1978, a composite team from the Ministry of Finance Bureau of Investigation and Intelligence (herein
referred to as BII), the Bureau of Customs and the Integrated National Police enforced the search and seizure warrants, and
seized and confiscated the following articles, among others, found in the premises of the Hercules Bottling Co., Inc. (herein
referred to as HERCULES) at Isla de Provisor, Paco, Manila:
Six (6) Tanks of Scotch Whisky; 417 cartons each containing I doz. bottles of "Johnnie Walker Black Label
Whisky"; 109 empty bottles; Empty Cartons of "Johnnie Walker Black Label Scotch Whisky" number 900-2044
empty cartons. [Rollo, p. 21].
The articles seized remained in the premises of HERCULES guarded and secured by BII personnel.

11
On 2 January 1979, the Collector of Customs for the Port of Manila, after being informed of the seizure of the subject goods
and upon verification that the same were imported contrary to law, issued a warrant of seizure and detention, in Seizure
Identification No. 2-79, and ordered the immediate seizure and turnover of the seized items to its Auction and Cargo Disposal
Division at the Port of Manila. Seizure and forfeiture proceedings were then initiated against the above-enumerated articles
for alleged violation of Section 2530 (f) of the Tariff and Customs Code, in relation to Republic Act 3720, to wit:
Sec. 2530. Property subject to forfeiture under Tariff and Customs law:
xxx
(f) Any article the importation or exportation of which is effected or attempted contrary to law, or any article of
prohibited importation or exportation, and all other articles which, in the opinion of the collector have been
used, are or were entered to be used as instruments in the importation or exportation of the former.
xxx
On 29 January 1979, the CFI-MANILA issued an order authorizing the transfer and delivery of the seized articles to the
customs warehouse located at South Harbor, Port of Manila, subject to the following conditions:
1. The Commissioner of Customs is willing to have custody of the same and guarantees their safekeeping at
all times in the same quantity, quality, manner and condition when the articles shall be turned over to and
received by the Bureau of Customs in custodia legis, subject to the further orders from the Court;
2. No article shall be transferred without the presence of a representative of the applicant, the defendants, the
Commissioner of Customs and the Court; these representatives to secure the necessary escort as guarantee
that nothing will happen during the transfer of the articles.
3. The Commissioner of Customs to issue the proper and necessary receipt for each and every article
transferred to and received by the Bureau of Customs pursuant to this order [Rollo, p. 22].
Meanwhile, the validity and constitutionality of the issuance and service of the search and seizure warrants issued by the
CFI- MANILA were contested in and upheld by the Court of Appeals in CA-G.R. No. SP-09153-R entitled "Hercules Bottling
Co. Inc., et al., v. Victoriano Savellano, et al." HERCULES filed a petition for certiorari in the Supreme Court but in a
resolution dated 26 November 1986 in G.R. No. 55061 captioned as Hercules Bottling Co., Inc. v. The Court of Appeals, the
Court dismissed the petition.
Consequently, the City Fiscal of Manila proceeded with the preliminary investigation of the criminal cases, where private
respondent, The Distillers Co. Ltd. of England, claiming to be the owner and exclusive manufacturer of Johnnie Walker
Scotch Whiskey was the private complainant [Rollo, p. 61], With the dismissal of HERCULES' petition, the Bureau of
Customs also resumed hearing the seizure and forfeiture proceedings over the said articles.
The present controversy arose when private respondent, on 11 June 1982, objected to the continuation by the Collector of
Customs of the seizure proceedings claiming, among others, that these proceedings would hamper or even jeopardize the
preliminary investigation being conducted by the fiscal. The Collector of Customs ignored the objections.
In order to stop and enjoin the Hearing Officer of the Bureau of Customs from taking further action in the seizure proceedings
of the subject goods, private respondent on 24 September 1982 filed a petition for prohibition with preliminary injunction
and/or temporary restraining order, docketed as Civil Case No. 82-12721. It must be noted at this juncture that the petition
was heard not before the CFI-MANILA which originally issued the search warrants, but before another sala, that of
respondent judge of the Regional Trial Court, Branch 35, Manila.
Respondent judge issued a temporary restraining order on 29 September 1982. Subsequently, a writ for preliminary injunction
was issued as well. Petitioner filed an answer on 12 November 1982. On 20 July 1987, respondent judge rendered a decision

12
holding that the Collector of Customs acted in excess of its jurisdiction in issuing the warrant of seizure and detention
considering that the subject goods had already come under the legal custody of the CFI-MANILA. Hence, petitioner
represented by the Solicitor General, filed the instant petition on 11 August 1987.
In the meantime, Howard Sosis and company were charged for violation of Chapter VI, Sec. 11(a) & (e) of Republic Act 3720
in Criminal Case No. 88-63157 and for violation of Article 188 of the Revised Penal Code in Criminal Case No. 88-63156
before the Regional Trial Court and the Metropolitan Trial Court of Manila, respectively [Rollo, p. 83].
In his petition, the Commissioner of Customs assigns as errors the following:
I. RESPONDENT JUDGE ERRED IN ISSUING A TEMPORARY RESTRAINING ORDER AND
SUBSEQUENTLY A WRIT OF INJUNCTION IN CIVIL CASE NO. 82-12721 NOTWITHSTANDING THE FACT
THAT PRIVATE RESPONDENT, THE DISTILLERS CO., LTD., OF ENGLAND HAS NO VALID CAUSE OF
ACTION AGAINST HEREIN PETITIONER;
II. RESPONDENT RTC JUDGE GRAVELY ERRED IN TAKING COGNIZANCE OF THE PETITION AND IN
PROCEEDING TO HEAR AND RENDER A DECISION IN CIVIL CASE NO. 82-12721 NOTWITHSTANDING
THE FACT THAT THE TRIAL COURT HAS NO JURISDICTION OVER THE CASE [Rollo, pp. 10-11].
Petitioner contends that the authority of the Bureau of Customs over seizure and forfeiture cases is beyond the judicial
interference of the Regional Trial Court, even in the form of certiorari, prohibition or mandamus which are really attempts to
review the Commissioner's actions [Rollo, p. 98]. Petitioner argues that judicial recourse from the decision of the Bureau of
Customs on seizure and forfeiture cases can only be sought in the Court of Tax Appeals and eventually in this Court.
Private respondent however contends that while the law may have vested exclusive jurisdiction in the Bureau of Customs
over forfeiture and seizure cases, in this case respondent judge had jurisdiction to enjoin the Bureau of Customs from
continuing with its seizure and forfeiture proceedings since the articles here were already incustodia legis, by virtue of the
search warrants issued by the CFI-MANILA. Private respondent contends that respondent judge may properly take
cognizance of the instant case since unlike the cases cited by petitioner, the action for prohibition was brought not to claim
ownership or possession over the goods but only to preserve the same and to prevent the Bureau of Customs from doing
anything prejudicial to the successful prosecution of the criminal cases [Rollo, p. 123].
The issue thus presented is whether or not respondent judge may enjoin the Collector of Customs from continuing with its
seizure and forfeiture proceedings over goods earlier seized by virtue of search warrants issued by the CFI-MANILA.
The instant petition is impressed with merit.
This Court finds that respondent-judge has failed to adhere to the prevailing rule which denies him jurisdiction to enjoin the
Bureau of Customs from taking further action in the seizure and forfeiture proceedings over the subject goods.
Jurisprudence is replete with cases which have held that regional trial courts are devoid of any competence to pass upon the
validity or regularity of seizure and forfeiture proceedings conducted in the Bureau of Customs, and to enjoin, or otherwise
interfere with, these proceedings. The Collector of Customs sitting in seizure and forfeiture proceedings has exclusive
jurisdiction to hear and determine all questions touching on the seizure and forfeiture of dutiable goods. The regional trial
courts are precluded from assuming cognizance over such matters even through petitions of certiorari, prohibition or
mandamus [See General Travel Service v. David, G.R. No. L-19259, September 23, 1966, 18 SCRA 59; Pacis v. Averia, G.R.
No. L-22526, November 29, 1966, 18 SCRA 907; De Joya v. Lantin, G.R. No. L-24037, April 27, 1967, 19 SCRA 893; Ponce
Enrile v. Vinuya G.R. No. L-29043, January 30, 1971, 37 SCRA 381; Collector of Customs v. Torres, G.R. No. L-22977, May
31, 1972, 45 SCRA 272; Pacis v. Geronimo, G.R. No. L-24068, April 23, 1974,56 SCRA 583; Commissioner of Customs v.
Navarro, G.R. No. L-33146, May 31, 1977, 77 SCRA 264; Republic v. Bocar, G.R. No. L-35260, September 4, 1979,93 SCRA
78; De la Fuente v. De Veyra, G.R. No. L-35385, January 31, 1983, 120 SCRA 451].

13
It is likewise well-settled that the provisions of the Tariff and Customs Code and that of Republic Act No. 1125, as
amended ** specify the proper fora for the ventilation of any legal objections or issues raised concerning these proceedings. Actions of the Collector of Customs are
appealable to the Commissioner of Customs, whose decisions, in turn, are subject to the exclusive appellate jurisdiction of the Court of Tax Appeals. Thereafter, an appeal lies
to this Court through the appropriate petition for review by writ of certiorari. Undeniably, regional trial courts do not share these review powers.

The above rule is anchored upon the policy of placing no unnecessary hindrance on the government's drive not only to
prevent smuggling and other frauds upon customs, but also, and more importantly, to render effective and efficient the
collection of import and export duties due the state. For tariff and customs duties are taxes constituting a significant portion of
the public revenue which are the lifeblood that enables the government to carry out functions it has been instituted to perform.
Notwithstanding these considerations, respondent judge entertained private respondent's petition for prohibition holding that
the seizure and forfeiture proceedings instituted in the Bureau of Customs was null and void because the subject goods were
earlier seized by virtue of the warrants issued by the CFI-MANILA in Criminal Cases Nos. 8602 and 8603.
This holding is erroneous.
Even if it be assumed that a taint of irregularity may be imputed to the exercise by the Collector of Customs of his jurisdiction
to institute seizure and forfeiture proceedings over the subject goods because he had accepted custody of the same under
conditions specified in the CFI-Manila order dated January 29, 1979, it would not mean that respondent judge was
correspondingly vested with the jurisdiction to interfere with such proceedings (See Ponce Enrile v. Vinuya supra]. It bears
repeating that law and settled jurisprudence clearly deprive the regional trial courts of jurisdiction to enjoin the Collector of
Customs from exercising his exclusive authority to order seizure and forfeiture proceedings over imported goods.
Moreover, there is no legal basis for respondent judge's conclusion that the Collector of Customs is deprived of his jurisdiction
to issue the assailed warrant of seizure and detention, and to institute seizure and forfeiture proceedings for the subject
goods simply because the same were first taken in custodia legis.
Undeniably, the subject goods have been brought under the legal control of the CFI-MANILA by virtue of its search and
seizure warrants and are, therefore, in custodia legis. But this fact merely serves to deprive any other court or tribunal, except
one having supervisory control or superior jurisdiction in the premises, of the right to divest the CFI-MANILA of its custody
and control of the said property [Collector of Internal Revenue v. Flores Vda. de Codinera G.R. No. L-9675, September 28,
1957], or to interfere with and change its possession without its consent [National Power Corporation v. De Veyra, G.R. No. L15763, December 22, 1961, 3 SCRA 646; De Leon v. Salvador, G.R. Nos. L-30871 & L-31603, December 28, 1970, 36 SCRA
567; Vlasons Enterprises Corporation v. Court of Appeals, G.R. No. 61688, October 28, 1987, 155 SCRA 186].
In the instant case, the CFI-Manila was not divested of its jurisdiction over the subject goods, nor were its processes
interfered with by the Collector of Customs. It, in fact, authorized the transfer and delivery of the subject goods from the
premises of HERCULES to the Bureau of Customs warehouse/bodega at the South Harbor, Port of Manila thereby entrusting
the Bureau of Customs with the actual possession and control of the same.
On the other hand, since the Collector of Customs herein had actual possession and control over the subject goods, his
jurisdiction over the goods was secured for the purpose of instituting seizure and forfeiture proceedings to determine whether
or not the same were imported into the country contrary to law [See Papa v. Mago, G.R. No. L-27360, February 28, 1968, 22
SCRA 857]. This is consistent with the principle that the basic operative fact for the institution and perfection of
proceedings in rem like the seizure and forfeiture proceedings pursuant to the Tariff and Customs Code, is the actual or
constructive possession of the res by the tribunal empowered by law to conduct the proceedings [See Dodge v. US, 71 L. ed.
392 (1926); US v. Mack, 79 L. ed. 1559 (1935) citing The Ann, 3 L. ed. 734 (1815); Fettig Canning Co. v. Steckler, 188 F. 2d
715 (1951) citing Strong v. US, 46 F. 2d 257, 79 ALR 150 (1931)].
Therefore, contrary to the import of respondent judge's decision, the Collector of Customs was not precluded by law or legal
principle from assuming jurisdiction over the subject goods. No legal infirmity attended the seizure and forfeiture proceedings
over the subject goods.

14
The Court must emphasize at this point that the instant case does not involve a conflict of jurisdictions. Proceedings before
the regular courts for criminal prosecutions against Howard Sosis, et al., and seizure and forfeiture proceedings for the
subject goods conducted by the Bureau of Customs may be maintained simultaneously and independently of each other. For
the nature of the two proceedings are entirely different such that a resolution in one is not decisive of the issue in the other.
The latter, which is administrative and civil in nature, is directed against the res or articles imported and entails a
determination of the legality of its importation. The former is directed against those persons who may be held liable for
violating the penal laws in connection with the importation [See Diosamito v. Balanque, G.R. No. L-30734, July 28,1969,28
SCRA 836; People v. CFI, G.R. No. L-41686, November 17, 1980, 101 SCRA 86].
Private respondent, however, argues that conflict may arise regarding the disposition of the subject goods if the proceedings
before the Collector of Customs and the regular courts were allowed to proceed simultaneously. Private respondent contends
that in view of the nature of the seizure and forfeiture proceedings, a judgment in favor of HERCULES will result in the
release of the subject goods to the claimants thereof, while an unfavorable decision will entail their destruction or sale. It is
asserted that either of the two outcomes will hamper or even jeopardize the ongoing criminal prosecutions, said goods
comprising the substantial part of the evidence for the People of the Philippines.
Proper adherence by both tribunals to the rules of comity as defined in the leading case of The Government of the Philippines
v. Gale [24 Phil. 95 (1931)] will forestall the conflict feared. In that case the Court had established the rule that where the
preservation and safekeeping of the subject matter of an action is demanded, as it is made to appear that these articles may
prove to be of vital importance as exhibits in the prosecution of other charges in another proceeding, the rules for the orderly
course of proceedings in courts and tribunals forbid the disposition or destruction thereof in one action which would prejudice
the other, and vice versa [Id. at pp. 98-99].
The State in the instant case must be given reasonable opportunity to present its cases for the proper enforcement of the
applicable provisions of the Revised Penal Code, Republic Act No. 3720, and the Tariff and Customs Code, and the
prosecution of the violators thereof. It follows then that the execution of any final decision in the seizure and forfeiture case
before the Bureau of Customs, whether it requires the destruction, sale or the release of the subject goods, should not
frustrate the prosecution's task of duly presenting and offering its evidence in Criminal Cases Nos. 88-63156 and 88-63157.
It is apropos to note that for evidentiary purposes, it would not be necessary to present each and every item of the goods in
question before the courts trying the criminal cases. Thus, a representative quantity of the goods, as may be agreed upon by
the authorized customs officials and fiscals prosecuting the criminal cases, shall be set aside as evidence to be presented in
the above criminal cases and retained in custodia legis until final judgment is secured in these cases. The rest of the goods
may be disposed of in accordance with the final decision rendered in the seizure and forfeiture proceedings pursuant to the
Tariff and Customs Code.
WHEREFORE, in view of the foregoing, the respondent judge's decision dated 20 July 1987 is REVERSED. The seizure and
forfeiture proceedings involving the goods in question before the Bureau of Customs may proceed subject to the above
pronouncements relative to the setting aside of so much of the goods as may be required for evidentiary purposes.
SO ORDERED

THIRD DIVISION
[A.M. No. RTJ-99-1484 (A). October 24, 2000]

JOSELITO RALLOS, JOSEFINA RALLOS VALLAR, SIMON RALLOS representing his

deceased father CARLOS RALLOS, TERESITA RALLOS YAP, and JOSELITO
RALLOS, complainants, vs. Judge IRENEO LEE GAKO JR., RTC, Branch 5, Cebu
City, respondent.

15

[A.M. No. RTJ-99-1484. October 24, 2000]

Executive Secretary RONALDO B. ZAMORA, complainant, vs. Judge IRENEO LEE

GAKO JR., RTC, Branch 5, Cebu City, respondent.
DECISION
PANGANIBAN, J.:

A judge may be held administratively liable for gross ignorance of the law when it is shown
that -- motivated by bad faith, fraud, dishonesty or corruption -- he ignored, contradicted or failed
to apply settled law and jurisprudence.
The Case

Two consolidated administrative cases were filed against Judge Ireneo Lee Gako Jr. of the
Regional Trial Court (RTC) of Cebu City, Branch 5.
The first case was filed by Joselito Rallos, Simon Rallos, Josefina Rallos Vallar and Teresita
Rallos Yap. It was an Administrative Complaint in connection with Special Proceedings Case No.
1576-R entitled Intestate Estate of Simeon Rallos, then pending before respondent.
The second was filed by Executive Secretary Ronaldo B. Zamora, charging respondent with
ignorance of the law and grave abuse of authority. This Complaint was based on the allegation
that the latter had ordered the release of 25,000 sacks of imported rice to the claimants,
[1]
notwithstanding the pendency of seizure and forfeiture proceedings before the Bureau of
Customs.
After respondent had filed his Comment, the Court, in its September 1, 1999 Resolution,
docketed the two cases as administrative matters and referred them to Deputy Court
Administrator Bernardo T. Ponferrada for investigation, report and recommendation.
After conducting hearings, the investigator submitted his findings and recommendations in a
Memorandum dated January 4, 2000.
On March 17, 2000, we promulgated a Decision finding respondent guilty of the first charge
and ordering him to pay a fine of P10,000. The second charge, however, was held in abeyance,
pending the judicial resolution of the Petition questioning respondents Orders. Hence, in its earlier
Decision, the Court disposed as follows:[2]
WHEREFORE, the Court finds Judge Ireneo Lee Gako Jr. GUILTY of grave abuse of authority and
partiality aggravated by dishonesty for which he is ordered to PAY a FINE of P10,000. He is sternly warned
that a commission of similar acts in the future shall be dealt with more severely. The Complaint filed by
Executive Secretary Ronaldo Zamora is hereby held in abeyance.

16

Respondents Motion for Reconsideration[3] of our March 17, 2000 Decision was denied with
finality by this Court.[4]
Subsequently, in a Decision[5] dated March 30, 2000, the Court set aside respondents Orders,
which were also the bases of Secretary Zamoras Complaint.
Hence, the Court will now rule on the second case against respondent.
The Facts

For clarity, we again present the antecedent facts in the first case, which were summarized by
the investigator[6] in this wise:
On December 8, 1998, the Economic Intelligence and Investigation Bureau (EIIB) of the Bureau of
Customs (BOC), the Philippine Coast Guard, and the Philippine National Police (PNP) at the Port of Cebu
withheld, for investigation, an estimated 25,000 sacks of rice marked as Snowman on board the vessel,
M/V Alberto. The sacks of rice allegedly came from Palawan to be unloaded in Cebu. Likewise seized on
the same date were nine cargo trucks to be used for carrying the subject sacks of rice.
The EIIB then wrote to the Bureau of Customs, Cebu, stating that upon further verification, no proper
voyage clearance to sail from Palawan to Cebu was issued to the vessel, M/V Alberto. The EIIB then
requested that a warrant of seizure and detention be issued over the rice shipment.
On December 9, 1998, the Bureau of Customs issued a Warrant of Seizure and Detention against: a) the
vessel M/V Alberto used in the illegal transport of imported staple rice; b) the imported staple rice
consisting of 25,000 sacks, more or less, with the Snowman brand; and c) nine (9) motor-vehicle trucks
used and utilized in the illegal transport of the rice. The warrant was also directed to the owner of the M/V
Alberto, ANMA Philippine Shipping Corporation, and the consignee of the rice shipment, Mark
Montelibano.
Thereafter, the claimants Mark Montelibano and Elson Ogario, on December 10, 1998, filed a complaint
for injunction with prayer for temporary restraining order and writ of preliminary injunction. The case,
entitled Elson Ogario and Mark Montelibano vs. Bureau of Customs, EIIB, Philippine Navy, Maritime
Command, Philippine National Police, Philippine Coast Guard and All Enforcement Agencies was
docketed as Civil Case No. CEB 23077 and assigned to Branch 5, Regional Trial Court of Cebu City, which
is the sala of respondent judge. The complaint alleged that the acts of defendants in intercepting the subject
sacks of rice [were] unlawful, illegal and merely based on suspicion. Thus, plaintiffs prayed for the quashal
of the warrant of seizure and detention (dated December 9, 1998) issued by the Collector of Customs, and
for the release of the goods.
The Bureau of Customs filed a motion to dismiss on December 11, 1998, alleging that the trial court ha[d]
no jurisdiction over the complaint. x x x

17

xxxxxxxxx
The Bureau of Customs also pointed out that the appropriate seizure proceeding was already instituted on
December 9, 1998, by virtue of the issuance of the warrant of seizure and detention. This had the effect of
depriving the trial court of jurisdiction over the matter.
On December 28, 1998, a hearing was held by respondent judge on both the motion to dismiss of the
Bureau of Customs and the complainants application for a writ of preliminary injunction. The parties
presented evidence in support of their respective positions.
In a Resolution dated January 11, 1999, the respondent judge denied the Bureau of Customs motion to
dismiss and granted complainants prayer for writ of preliminary injunction, the dispositive portion of which
reads:
xxxxxxxxx
In the subject resolution, the respondent judge also ruled that the Bureau of Customs ha[d] no jurisdiction
because the goods involved [were] neither imported nor smuggled and were apprehended outside the
customs zone. As further basis, it was ruled that plaintiff was able to present a certification issued by the
National Food Authority that the subject rice came from Palawan. Defendants, on the other hand, submitted
no evidence that the subject bags of rice were imported or smuggled. The issuance of the warrant of seizure
and detention being arbitrary and without probable cause, it did not divest the trial court of its jurisdiction.
The Bureau of Customs filed a motion for reconsideration, but this was subsequently denied in the trial
courts Order dated January 25, 1999. In this resolution, respondent judge ordered the defendants to release
the 25,000 sacks of rice without delay, the dispositive portion of which reads:
xxxxxxxxx
The Bureau of Customs, through the Office of the Solicitor General, filed a petition for certiorari before the
Court of Appeals, docketed as CA-G.R. SP No. 51051, assailing the Resolutions dated January 11 and 25,
1999 of the respondent judge.
In the meantime, on April 5, 1999, the District Collector of Customs of Cebu City rendered a Decision in
the seizure proceedings (Cebu Seizure Identification Case No. 17-98) declaring the 25,000 sacks of
Snowman rice as smuggled and ordering their forfeiture.
On April 15, 1999, the Court of Appeals issued a Decision [7] denying the petition for certiorari filed by the Bureau
of Customs and affirmed the questioned Resolutions dated January 11 and 25, 1999 issued [by] respondent judge.

In view of the Court of Appeals decision, respondent judge issued another Resolution dated April 26, 1999
reiterating the release of the 25,000 sacks of rice, the dispositive portion of which reads:
xxxxxxxxx

18

A petition for review was then filed by the Bureau of Customs before the Supreme Court questioning the
Decision of the Court of Appeals. Upon application, a Temporary Restraining Order was subsequently
issued by the Supreme Court on May 17, 1999, enjoining the Presiding Judge of the Regional Trial Court,
7th Judicial Region, Branch 5, Cebu City or any of his representatives and the respondents from enforcing
or causing to be enforced the questioned Resolution dated 11 January 1999, the Order dated 25 January
1999, and the Resolution dated 26 April 1999, as well as all subsequent orders issued by the Regional Trial
Court, Branch 5, Cebu City in Civil Case No. CEB-23077 entitled Elson Ogario and Mark Montelibano vs.
Bureau of Customs, et. al.
xxxxxxxxx
Respondent judge was required to comment on the administrative complaint.
1. In his Comment dated July 21, 1999 (Exh. 8), the judge in essence, sought to justify the issuance of the
questioned orders on the following propositions:
a. The Warrant of Seizure and Detention issued by the Bureau of Customs of the Port of Cebu on December 9,
1998 was based merely on a suspicion and not anchored on probable cause. Hence, the issuance of the
Warrant was not valid and, therefore, of no legal effect.
b. That the Bureau of Customs [of the Port of] Cebu x x x abused its authority or function in seizing the '25
thousand bags of rice' on the basis of a suspicion that they were smuggled goods or illegally imported. The
issuance of the Warrant of Seizure and Detention was arbitrary.
c. That the Regional Trial Court Judge in the exercise of his jurisdiction, can issue an injunction to stop or
prevent a purported enforcement of a criminal law which is not in accordance with an orderly administration
of justice, and also to stop and prevent the Bureau of Customs from using the strong arm of the law in an
oppressive and arbitrary manner.[8]
Investigators Recommendation

Deputy Court Administrator Ponferrada recommended that respondent be suspended for six
months without pay in regard to Secretary Zamoras Complaint for gross ignorance of the law. The
investigator explained as follows:
"Well-settled is the rule that the trial court has no jurisdiction over the property subject of the warrant of
seizure and detention issued by the Bureau of Customs. In the case of Mison vs. Natividad,[9] the Honorable
Supreme Court held that:

'The court a quo has no jurisdiction over the res subject of the warrant of seizure and detention. The
respondent judge, therefore, acted arbitrarily and despotically in issuing the temporary restraining order,
granting the writ of preliminary injunction and denying the motion to dismiss, thereby removing the res
from the control of the Collector of Customs and depriving him of his exclusive original jurisdiction over
the controversy. Respondent judge exercised a power he never had and encroached upon the exclusive
original jurisdiction of the Collector of Customs. By express provision of law, amply supported by well-

19

settled jurisprudence, the Collector of Customs has exclusive jurisdiction over seizure and forfeiture
proceedings, and regular courts cannot interfere with his exercise thereof or stifle or put it to naught.
"The Office of the Court Administrator also issued Circular 68-94 dated November 3, 1994, which
reiterated the provisions of Circular No. 13-93.
"The aforesaid circulars were again reiterated in Administrative Circular No. 07-99 dated June 25, 1999
issued by Chief Justice Hilario G. Davide informing judges of the lower courts to exercise utmost caution,
prudence, and judiciousness in the issuance of temporary restraining orders and writs of preliminary
injunctions to avoid any suspicion that its issuance or grant was for considerations other than the strict
merits of the case. x x x[10]
The Courts Ruling

We agree with the findings of the deputy court administrator. However, we reduce the penalty
to three months suspension without pay.
Gross Ignorance of the Law

The administrative case, initiated by Secretary Zamora, is bolstered by Bureau of Customs

(B0C) v. Ogario,[11] in which the Court set aside respondents Orders. We ruled thus:
In Jao v. Court of Appeals, this Court, reiterating its ruling in a long line of cases, said:
There is no question that Regional Trial Courts are devoid of any competence to pass upon the validity or
regularity of seizure and forfeiture proceedings conducted by the Bureau of Customs and to enjoin or
otherwise interfere with these proceedings. The Collector of Customs sitting in seizure and forfeiture
proceedings has exclusive jurisdiction to hear and determine all questions touching on the seizure and
forfeiture of dutiable goods. The Regional Trial Courts are precluded from assuming cognizance over such
matters even through petitions for certiorari, prohibition or mandamus.
xxxxxxxxx
The rule that Regional Trial Courts have no review powers over such proceedings is anchored upon the
policy of placing no unnecessary hindrance on the governments drive, not only to prevent smuggling and
other frauds upon Customs, but more importantly, to render effective and efficient the collection of import
and export duties due the State, which enables the government to carry out the functions it has been
instituted to perform.
Even if the seizure by the Collector of Customs were illegal, which has yet to be proven, we have said that
such act does not deprive the Bureau of Customs of jurisdiction thereon. [12] (citations omitted.)
Clearly, respondent had absolutely no jurisdiction to take cognizance of the Complaint for
Injunction filed by Ogario and Montelibano.[13] Administrative Circular No. 07-99,[14] cautioning lower

20

court judges in their issuance of temporary restraining orders and writs of preliminary injunctions,
emphasized this lack of jurisdiction of trial courts. It stressed, inter alia, the rule enunciated
in Mison:[15] that the Collector of Customs has exclusive jurisdiction over seizure and forfeiture
proceedings.
When asked to explain why he ruled contrary to a basic and settled doctrine, respondent
explained as follows:
The court believes that a Warrant of Seizure and Detention, which is a counterpart of a Warrant of Arrest,
must be issued on the basis of a probable cause. Verily, the quantum of evidence required in the issuance of
a Warrant of Seizure and Detention should also be the same as in the Warrant of Arrest. Consequently, since
the said Warrant of Seizure and Detention was merely issued on the basis of a mere suspicion and as
recommended by the EIIB and not anchored on probable cause, the same is not valid and has no legal
effect.
xxxxxxxxx
In the instant case, the court believes that the defendants had abused their authority or function in seizing
the plaintiffs goods on the basis of suspicion that they are smuggled or illegally imported. The court also
believes that the issuance of the Warrant of Seizure and Detention by the defendant Bureau of Customs was
attended with arbitrariness. x x x. Consequently, the Regional Trial Court, in the exercise of its general
jurisdiction, can issue an injunction to stop or prevent a purported enforcement of the criminal law which is
not in accordance with an orderly administration of justice, and also to stop and prevent the defendants
from using the strong arm of the law in an oppressive and arbitrary manner.[16]
The reason given by respondent is unsatisfactory, having been aptly answered in Ogario,
[17]
from which we quote:
[U]nder the law, the question of whether probable cause exists for the seizure of the subject sacks of rice is
not for the Regional Trial Court to determine. The customs authorities do not have to prove to the
satisfaction of the court that the articles on board a vessel were imported from abroad or are intended to be
shipped abroad before they may exercise the power to effect customs searches, seizures, or arrests provided
by law and continue with the administrative hearings. As the Court held in Ponce Enrile v. Vinuya:
The governmental agency concerned, the Bureau of Customs, is vested with exclusive authority. Even if it
be assumed that in the exercise of such exclusive competence a taint of illegality may be correctly imputed,
the most that can be said is that under certain circumstances the grave abuse of discretion conferred may
oust it of such jurisdiction. It does not mean however that correspondingly a court of first instance is vested
with competence when clearly in the light of the above decisions the law has not seen fit to do so. The
proceeding before the Collector of Customs is not final. An appeal lies to the Commissioner of Customs
and thereafter to the Court of Tax Appeals. It may even reach this Court through the appropriate petition for
review. The proper ventilation of the legal issues raised is thus indicated. Certainly a court of first instance
is not therein included. It is devoid of jurisdiction. (citations omitted; emphasis in the original)

21

Clearly, respondent decided against a settled doctrine. This act constitutes gross ignorance of
the law.[18] However, we have held that to be punishable as such, it must not only be contradictory
to existing law and jurisprudence, but must also be motivated by bad faith, fraud, dishonesty or
corruption.[19] That there is enough evidence here to show respondents bad faith is aptly pointed
out by the Office of the Court Administrator (OCA) in its Memorandum:[20]
The records of this case indicate that after the issuance of that questioned order of January 11, 1999, the
Bureau of Customs, et al. filed their Motions for Reconsideration and requested to set the hearing on
January 21, 1999, the date scheduled by the respondent judge for the continuation of the trial on the merits
in Civil Case No. CEB-23077. But, the respondent judge set the hearing of said motions on January 19,
1999.
However, from January 18, 1999 to January 21, 1999, the respondent judge did not report to the Court. He
could not be contacted or located even by his own staff. The respondent judge also did not leave any word
regarding his whereabouts, even with the Executive Judge. Hence, the scheduled hearings could not
proceed.
Obviously, the respondent judge reported back to his Office only after the Assistant Solicitor General and
the Solicitor representing the Bureau of Customs, et al. returned to Manila from Cebu City because on
January 22, 1999, the same respondent judge issued instead, an order requiring the Officials of the Bureau
of Customs to comment on a Motion for Contempt filed against them.
Indeed, this actuation of respondent judge amounted to bad faith. Because he played with the
court calendar, the issuance of the questioned Orders was clearly motivated by dishonesty and
fraud.
While we agree with the findings of the OCA, we believe however that the recommended
penalty is too harsh. Under the circumstances, we hold that the appropriate penalty is three
months suspension without pay.
Likewise, we agree that respondents Motion to Dismiss had no legal basis either. Indeed, [t]he
subject of the x x x administrative case are the acts committed by the respondent judge in the
performance of his duties. This being the sole subject of the complaint filed by the Executive
Secretary, the Court will confine itself to the issue of whether or not the respondent judge is liable
for gross ignorance of the law.[21]
WHEREFORE, the Court finds Judge Ireneo Lee Gako Jr. GUILTY of gross ignorance of the
law, for which he is hereby SUSPENDED for three months without pay. He is sternly warned that
a commission of similar acts in the future shall be dealt with more severely.
SO ORDERED.

22

FIRST DIVISION
LUCAS G. ADAMSON, THERESE G.R. No. 120935
JUNE D. ADAMSON, and SARA
S. DE LOS REYES, in their capacities
as President, Treasurer and Secretary
of Adamson Management Corporation,
Petitioners,
- versus COURT OF APPEALS and
LIWAYWAY VINZONS-CHATO,
in her capacity as Commissioner
of the Bureau of Internal Revenue,
Respondents.
x-- - - - - - - - - - - - - - - - - - - - - - - - x
COMMISSIONER OF G.R. No. 124557
INTERNAL REVENUE,
Petitioner,
Present:
-versus- PUNO, C.J., Chairperson,
CARPIO,
CORONA,
COURT OF APPEALS, COURT LEONARDO-DE CASTRO, and
OF TAX APPEALS, ADAMSON BERSAMIN, JJ.
MANAGEMENT CORPORATION,
LUCAS G. ADAMSON, THERESE
JUNE D. ADAMSON, and SARA Promulgated:
S. DE LOS REYES,
Respondents. May 21, 2009
x--------------------------------------------------x
DECISION
PUNO, C.J.:
Before the Court are the consolidated cases of G.R. No. 120935 and G.R. No. 124557.

23

G.R. No. 120935 involves a petition for review on certiorari filed by petitioners LUCAS G.
ADAMSON, THERESE JUNE D. ADAMSON, and SARA S. DE LOS REYES (private respondents),
in their respective capacities as president, treasurer and secretary of Adamson Management Corporation
(AMC) against then Commissioner of Internal Revenue Liwayway Vinzons-Chato
(COMMISSIONER), under Rule 45 of the Revised Rules of Court. They seek to review and reverse the
Decision promulgated onMarch 21, 1995 and Resolution issued on July 6, 1995 of the Court of Appeals
in CA-G.R. SP No. 35488 (Liwayway Vinzons-Chato, et al. v. Hon. Judge Erna Falloran-Aliposa, et
al.).
G.R. No. 124557 is a petition for review on certiorari filed by the Commissioner, assailing the
Decision dated March 29, 1996 of the Court of Appeals in CA-G.R. SP No. 35520, titled Commissioner
of Internal Revenue v. Court of Tax Appeals, Adamson Management Corporation, Lucas G. Adamson,
Therese June D. Adamson and Sara S. de los Reyes. In the said Decision, the Court of Appeals upheld
the Resolution promulgated on September 19, 1994 by the Court of Tax Appeals (CTA) in C.T.A. Case
No. 5075 (Adamson Management Corporation, Lucas G. Adamson, Therese Adamson and Sara de los
Reyes v. Commissioner of Internal Revenue).
The facts, as culled from the findings of the appellate court, follow:
On June 20, 1990, Lucas Adamson and AMC sold 131,897 common shares of stock in Adamson
and Adamson, Inc. (AAI) to APAC Holding Limited (APAC). The shares were valued at P7,789,995.00.
[1]
On June 22, 1990, P159,363.21 was paid as capital gains tax for the transaction.
On October 12, 1990, AMC sold to APAC Philippines, Inc. another 229,870 common shares of
stock in AAI for P17,718,360.00. AMC paid the capital gains tax ofP352,242.96.
On October 15, 1993, the Commissioner issued a Notice of Taxpayer to AMC, Lucas G.
Adamson, Therese June D. Adamson and Sara S. de los Reyes, informing them of deficiencies on their
payment of capital gains tax and Value Added Tax (VAT). The notice contained a schedule for
preliminary conference.
The events preceding G.R. No. 120935 are the following:
On October 22, 1993, the Commissioner filed with the Department of Justice (DOJ) her Affidavit
of Complaint[2] against AMC, Lucas G. Adamson, Therese June D. Adamson and Sara S. de los Reyes
for violation of Sections 45 (a) and (d)[3], and 110[4], in relation to Section 100[5], as penalized under
Section 255,[6] and for violation of Section 253[7], in relation to Section 252 (b) and (d) of the National
Internal Revenue Code (NIRC).[8]

24

AMC, Lucas G. Adamson, Therese June D. Adamson and Sara S. de los Reyes filed with the
DOJ a motion to suspend proceedings on the ground of prejudicial question, pendency of a civil case
with the Supreme Court, and pendency of their letter-request for re-investigation with the
Commissioner. After the preliminary investigation, State Prosecutor Alfredo P. Agcaoili found probable
cause. The Motion for Reconsideration against the findings of probable cause was denied by the
prosecutor.
On April 29, 1994, Lucas G. Adamson, Therese June D. Adamson and Sara S. de los Reyes were
charged before the Regional Trial Court (RTC) of Makati, Branch 150 in Criminal Case Nos. 94-1842
to 94-1846. They filed a Motion to Dismiss or Suspend the Proceedings. They invoked the grounds that
there was yet no final assessment of their tax liability, and there were still pending relevant Supreme
Court and CTA cases. Initially, the trial court denied the motion. A Motion for Reconsideration was
however filed, this time assailing the trial courts lack of jurisdiction over the nature of the subject
cases. On August 8, 1994, the trial court granted the Motion. It ruled that the complaints for tax evasion
filed by the Commissioner should be regarded as a decision of the Commissioner regarding the tax
liabilities of Lucas G. Adamson, Therese June D. Adamson and Sara S. de los Reyes, and appealable to
the CTA. It further held that the said cases cannot proceed independently of the assessment case
pending before the CTA, which has jurisdiction to determine the civil and criminal tax liability of the
respondents therein.
On October 10, 1994, the Commissioner filed a Petition for Review with the Court of Appeals
assailing the trial courts dismissal of the criminal cases. She averred that it was not a condition
prerequisite that a formal assessment should first be given to the private respondents before she may
file the aforesaid criminal complaints against them. She argued that the criminal complaints for tax
evasion may proceed independently from the assessment cases pending before the CTA.
On March 21, 1995, the Court of Appeals reversed the trial courts decision and reinstated the
criminal complaints. The appellate court held that, in a criminal prosecution for tax evasion,
assessment of tax deficiency is not required because the offense of tax evasion is complete or
consummated when the offender has knowingly and willfully filed a fraudulent return with intent
to evade the tax.[9] It ruled that private respondents filed false and fraudulent returns with intent
to evade taxes, and acting thereupon, petitioner filed an Affidavit of Complaint with the
Department of Justice, without an accompanying assessment of the tax deficiency of private
respondents, in order to commence criminal action against the latter for tax evasion.[10]
Private respondents filed a Motion for Reconsideration, but the trial court denied the motion
on July 6, 1995. Thus, they filed the petition in G.R. No. 120935, raising the following issues:

25

1.

WHETHER OR NOT THE RESPONDENT HONORABLE COURT OF APPEALS ERRED IN

APPLYING THE DOCTRINE IN UNGAB V. CUSI (Nos. L-41919-24, May 30, 1980, 97 SCRA
877) TO THE CASE AT BAR.

2.

WHETHER OR NOT AN ASSESSMENT IS REQUIRED UNDER THE SECOND CATEGORY

OF THE OFFENSE IN SECTION 253 OF THE NIRC.

3.

WHETHER OR NOT THERE WAS A VALID ASSESSMENT MADE BY THE

COMMISSIONER IN THE CASE AT BAR.

4.

WHETHER OR NOT THE FILING OF A CRIMINAL COMPLAINT SERVES AS AN

IMPLIED ASSESSMENT ON THE TAX LIABILITY OF THE TAXPAYER.

5.

WHETHER OR NOT THE FILING OF THE CRIMINAL INFORMATION FOR TAX

EVASION IN THE TRIAL COURT IS PREMATURE BECAUSE THERE IS YET NO BASIS
FOR THE CRIMINAL CHARGE OF WILLFULL INTENT TO EVADE THE PAYMENT OF A
TAX.

6.

WHETHER OR NOT THE DOCTRINES LAID DOWN IN THE CASES OF YABES V. FLOJO
(No. L-46954, July 20, 1982, 115 SCRA 286) AND CIR V. UNION SHIPPING CORP. (G.R. No.
66160, May 21, 1990, 185 SCRA 547) ARE APPLICABLE TO THE CASE AT BAR.

7.

WHETHER OR NOT THE COURT OF TAX APPEALS HAS JURISDICTION OVER THE
DISPUTE ON WHAT CONSTITUTES THE PROPER TAXES DUE FROM THE TAXPAYER.

In parallel circumstances, the following events preceded G.R. No. 124557:

On December 1, 1993, AMC, Lucas G. Adamson, Therese June D. Adamson and Sara S. de los
Reyes filed a letter request for re-investigation with the Commissioner of the Examiners Findings
earlier issued by the Bureau of Internal Revenue (BIR), which pointed out the tax deficiencies.
On March 15, 1994 before the Commissioner could act on their letter-request, AMC, Lucas G.
Adamson, Therese June D. Adamson and Sara S. de los Reyes filed a Petition for Review with the
CTA. They assailed the Commissioners finding of tax evasion against them. The Commissioner moved
to dismiss the petition, on the ground that it was premature, as she had not yet issued a formal
assessment of the tax liability of therein petitioners. On September 19, 1994, the CTA denied the
Motion to Dismiss. It considered the criminal complaint filed by the Commissioner with the DOJ as an
implied formal assessment, and the filing of the criminal informations with the RTC as a denial of
petitioners protest regarding the tax deficiency.
The Commissioner repaired to the Court of Appeals on the ground that the CTA acted with grave
abuse of discretion. She contended that, with regard to the protest provided under Section 229 of the
NIRC, there must first be a formal assessment issued by the Commissioner, and it must be in accord
with Section 6 of Revenue Regulation No. 12-85. She maintained that she had not yet issued a formal

26

assessment of tax liability, and the tax deficiency amounts mentioned in her criminal complaint with the
DOJ were given only to show the difference between the tax returns filed and the audit findings of the
revenue examiner.
The Court of Appeals sustained the CTAs denial of the Commissioners Motion to Dismiss. Thus,
the Commissioner filed the petition for review under G.R. No. 124557, raising the following issues:
1.

WHETHER OR NOT THE INSTANT PETITION SHOULD BE DISMISSED FOR FAILURE

TO COMPLY WITH THE MANDATORY REQUIREMENT OF A CERTIFICATION UNDER
OATH AGAINST FORUM SHOPPING;

2.

WHETHER OR NOT THE CRIMINAL CASE FOR TAX EVASION IN THE CASE AT BAR
CAN PROCEED WITHOUT AN ASSESSMENT;

3.

WHETHER OR NOT THE COMPLAINT FILED WITH THE DEPARTMENT OF JUSTICE

CAN BE CONSTRUED AS AN IMPLIED ASSESSMENT; and

4.

WHETHER OR NOT THE COURT OF TAX APPEALS HAS JURISDICTION TO ACT ON

PRIVATE RESPONDENTS PETITION FOR REVIEW FILED WITH THE SAID COURT.

The issues in G.R. No. 124557 and G.R. No. 120935 can be compressed into three:
1.

WHETHER THE COMMISSIONER HAS ALREADY RENDERED AN ASSESSMENT

(FORMAL OR OTHERWISE) OF THE TAX LIABILITY OF AMC, LUCAS G.
ADAMSON, THERESE JUNE D. ADAMSON AND SARA S. DE LOS REYES;

2.

WHETHER THERE IS BASIS FOR THE CRIMINAL CASES FOR TAX EVASION TO
PROCEED AGAINST AMC, LUCAS G. ADAMSON, THERESE JUNE D.
ADAMSON AND SARA S. DE LOS REYES; and

3.

WHETHER THE COURT OF TAX APPEALS HAS JURISDICTION TO TAKE

COGNIZANCE OF BOTH THE CIVIL AND THE CRIMINAL ASPECTS OF THE TAX
LIABILITY
OF AMC,
LUCAS
G.
ADAMSON,
THERESE
JUNE
D.
ADAMSON AND SARA S. DE LOS REYES.

The case of CIR v. Pascor Realty, et al.[11] is relevant. In this case, then BIR Commissioner Jose
U. Ong authorized revenue officers to examine the books of accounts and other accounting records of
Pascor Realty and Development Corporation (PRDC) for 1986, 1987 and 1988. This resulted in a
recommendation for the issuance of an assessment in the amounts of P7,498,434.65 and P3,015,236.35
for the years 1986 and 1987, respectively.
On March 1, 1995, the Commissioner filed a criminal complaint before the DOJ against PRDC,
its President Rogelio A. Dio, and its Treasurer Virginia S. Dio, alleging evasion of taxes in the total
amount of P10,513,671.00. Private respondents filed an Urgent Request for
Reconsideration/Reinvestigation disputing the tax assessment and tax liability.

27

The Commissioner denied the urgent request for reconsideration/reinvestigation because she had
not yet issued a formal assessment.
Private respondents then elevated the Decision of the Commissioner to the CTA on a petition for
review. The Commissioner filed a Motion to Dismiss the petition on the ground that the CTA has no
jurisdiction over the subject matter of the petition, as there was yet no formal assessment issued against
the petitioners. The CTA denied the said motion to dismiss and ordered the Commissioner to file an
answer within thirty (30) days. The Commissioner did not file an answer nor did she move to
reconsider the resolution.Instead, the Commissioner filed a petition for review of the CTA decision with
the Court of Appeals. The Court of Appeals upheld the CTA order. However, this Court reversed the
Court of Appeals decision and the CTA order, and ordered the dismissal of the petition. We held:
An assessment contains not only a computation of tax liabilities, but also a demand for payment
within a prescribed period. It also signals the time when penalties and interests begin to accrue against the
taxpayer. To enable the taxpayer to determine his remedies thereon, due process requires that it must be
served on and received by the taxpayer. Accordingly, an affidavit, which was executed by revenue officers
stating the tax liabilities of a taxpayer and attached to a criminal complaint for tax evasion, cannot be
deemed an assessment that can be questioned before the Court of Tax Appeals.
Neither the NIRC nor the revenue regulations governing the protest of assessments [12] provide a
specific definition or form of an assessment. However, the NIRC defines the specific functions and effects
of an assessment. To consider the affidavit attached to the Complaint as a proper assessment is to subvert
the nature of an assessment and to set a bad precedent that will prejudice innocent taxpayers.
True, as pointed out by the private respondents, an assessment informs the taxpayer that he or she has
tax liabilities. But not all documents coming from the BIR containing a computation of the tax liability
can be deemed assessments.
To start with, an assessment must be sent to and received by a taxpayer, and must demand payment of
the taxes described therein within a specific period. Thus, the NIRC imposes a 25 percent penalty, in
addition to the tax due, in case the taxpayer fails to pay the deficiency tax within the time prescribed for
its payment in the notice of assessment. Likewise, an interest of 20 percent per annum, or such higher rate
as may be prescribed by rules and regulations, is to be collected from the date prescribed for its payment
until the full payment.[13]
The issuance of an assessment is vital in determining the period of limitation regarding its proper
issuance and the period within which to protest it. Section 203[14] of the NIRC provides that internal
revenue taxes must be assessed within three years from the last day within which to file the
return. Section 222,[15] on the other hand, specifies a period of ten years in case a fraudulent return with
intent to evade was submitted or in case of failure to file a return. Also, Section 228[16] of the same law
states that said assessment may be protested only within thirty days from receipt thereof. Necessarily, the
taxpayer must be certain that a specific document constitutes an assessment. Otherwise, confusion would
arise regarding the period within which to make an assessment or to protest the same, or whether interest
and penalty may accrue thereon.
It should also be stressed that the said document is a notice duly sent to the taxpayer. Indeed, an
assessment is deemed made only when the collector of internal revenue releases, mails or sends such
notice to the taxpayer.[17]

28

In the present case, the revenue officers Affidavit merely contained a computation of respondents tax
liability. It did not state a demand or a period for payment. Worse, it was addressed to the justice secretary,
not to the taxpayers.
Respondents maintain that an assessment, in relation to taxation, is simply understood to mean:
A notice to the effect that the amount therein stated is due as tax and a demand for
payment thereof.[18]
Fixes the liability of the taxpayer and ascertains the facts and furnishes the data for
the proper presentation of tax rolls.[19]
Even these definitions fail to advance private respondents case. That the BIR examiners Joint
Affidavit attached to the Criminal Complaint contained some details of the tax liabilities of private
respondents does not ipso facto make it an assessment. The purpose of the Joint Affidavit was merely to
support and substantiate the Criminal Complaint for tax evasion. Clearly, it was not meant to be a notice
of the tax due and a demand to the private respondents for payment thereof.
The fact that the Complaint itself was specifically directed and sent to the Department of Justice and
not to private respondents shows that the intent of the commissioner was to file a criminal complaint
for tax evasion, not to issue an assessment. Although the revenue officers recommended the issuance of
an assessment, the commissioner opted instead to file a criminal case for tax evasion. What private
respondents received was a notice from the DOJ that a criminal case for tax evasion had been filed against
them, not a notice that the Bureau of Internal Revenue had made an assessment.
Private respondents maintain that the filing of a criminal complaint must be preceded by an
assessment. This is incorrect, because Section 222 of the NIRC specifically states that in cases where a
false or fraudulent return is submitted or in cases of failure to file a return such as this case, proceedings
in court may be commenced without an assessment. Furthermore, Section 205 of the same Code clearly
mandates that the civil and criminal aspects of the case may be pursued simultaneously. In Ungab v. Cusi,
[20]
petitioner therein sought the dismissal of the criminal Complaints for being premature, since his protest
to the CTA had not yet been resolved. The Court held that such protests could not stop or suspend the
criminal action which was independent of the resolution of the protest in the CTA. This was because the
commissioner of internal revenue had, in such tax evasion cases, discretion on whether to issue an
assessment or to file a criminal case against the taxpayer or to do both.
Private respondents insist that Section 222 should be read in relation to Section 255 of the NIRC,
which penalizes failure to file a return. They add that a tax assessment should precede a criminal
indictment. We disagree. To reiterate, said Section 222 states that an assessment is not necessary before a
criminal charge can be filed. This is the general rule. Private respondents failed to show that they are
entitled to an exception. Moreover, the criminal charge need only be supported by a prima facie showing
of failure to file a required return. This fact need not be proven by an assessment.
[21]

The issuance of an assessment must be distinguished from the filing of a complaint. Before an
assessment is issued, there is, by practice, a pre-assessment notice sent to the taxpayer. The taxpayer is
then given a chance to submit position papers and documents to prove that the assessment is
unwarranted. If the commissioner is unsatisfied, an assessment signed by him or her is then sent to the
taxpayer informing the latter specifically and clearly that an assessment has been made against him or
her. In contrast, the criminal charge need not go through all these. The criminal charge is filed directly
with the DOJ. Thereafter, the taxpayer is notified that a criminal case had been filed against him, not that
the commissioner has issued an assessment. It must be stressed that a criminal complaint is instituted not
to demand payment, but to penalize the taxpayer for violation of the Tax Code.

29

In the cases at bar, the Commissioner denied that she issued a formal assessment of the tax liability of
AMC, Lucas G. Adamson, Therese June D. Adamson and Sara S. de los Reyes. She admits though that
she wrote the recommendation letter [22] addressed to the Secretary of the DOJ recommending the filing
of criminal complaints against AMC and the aforecited persons for fraudulent returns and tax evasion.
The first issue is whether the Commissioners recommendation letter can be considered as a formal
assessment of private respondents tax liability.
In the context in which it is used in the NIRC, an assessment is a written notice and demand
made by the BIR on the taxpayer for the settlement of a due tax liability that is there definitely set and
fixed. A written communication containing a computation by a revenue officer of the tax liability of a
taxpayer and giving him an opportunity to contest or disprove the BIR examiners findings is not an
assessment since it is yet indefinite.[23]
We rule that the recommendation letter of the Commissioner cannot be considered a formal
assessment. Even a cursory perusal of the said letter would reveal three key points:
1. It was not addressed to the taxpayers.
2. There was no demand made on the taxpayers to pay the tax liability, nor a period for
payment set therein.
3. The letter was never mailed or sent to the taxpayers by the Commissioner.
In fine, the said recommendation letter served merely as the prima facie basis for filing criminal
informations that the taxpayers had violated Section 45 (a) and (d), and 110, in relation to Section 100,
as penalized under Section 255, and for violation of Section 253, in relation to Section 252 9(b) and
(d) of the Tax Code.[24]
The next issue is whether the filing of the criminal complaints against the private respondents by
the DOJ is premature for lack of a formal assessment.
Section 269 of the NIRC (now Section 222 of the Tax Reform Act of 1997) provides:
Sec. 269. Exceptions as to period of limitation of assessment and collection of taxes.-(a) In the case of a
false or fraudulent return with intent to evade tax or of failure to file a return, the tax may be assessed, or a
proceeding in court after the collection of such tax may be begun without assessment, at any time within
ten years after the discovery of the falsity, fraud or omission: Provided, That in a fraud assessment which
has become final and executory, the fact of fraud shall be judicially taken cognizance of in the civil or
criminal action for collection thereof

30

The law is clear. When fraudulent tax returns are involved as in the cases at bar, a proceeding in court
after the collection of such tax may be begun without assessment.Here, the private respondents had
already filed the capital gains tax return and the VAT returns, and paid the taxes they have declared due
therefrom. Upon investigation of the examiners of the BIR, there was a preliminary finding of gross
discrepancy in the computation of the capital gains taxes due from the sale of two lots of AAI shares,
first to APAC and then to APAC Philippines, Limited. The examiners also found that the VAT had not
been paid for VAT-liable sale of services for the third and fourth quarters of 1990. Arguably, the gross
disparity in the taxes due and the amounts actually declared by the private respondents constitutes
badges of fraud.
Thus, the applicability of Ungab v. Cusi[25] is evident to the cases at bar. In this seminal case, this
Court ruled that there was no need for precise computation and formal assessment in order for criminal
complaints to be filed against him. It quoted Mertens Law of Federal Income Taxation, Vol. 10, Sec.
55A.05, p. 21, thus:
An assessment of a deficiency is not necessary to a criminal prosecution for willful attempt to
defeat and evade the income tax. A crime is complete when the violator has knowingly and willfully filed
a fraudulent return, with intent to evade and defeat the tax. The perpetration of the crime is grounded upon
knowledge on the part of the taxpayer that he has made an inaccurate return, and the governments failure
to discover the error and promptly to assess has no connections with the commission of the crime.

This hoary principle still underlies Section 269 and related provisions of the present Tax Code.
We now go to the issue of whether the CTA has no jurisdiction to take cognizance of both the
criminal and civil cases here at bar.
Under Republic Act No. 1125 (An Act Creating the Court of Tax Appeals ) as amended, the rulings
of the Commissioner are appealable to the CTA, thus:
SEC. 7. Jurisdiction. The Court of Tax Appeals shall exercise exclusive appellate jurisdiction to
review by appeal, as herein provided (1) Decisions of the Commissioner of Internal Revenue in cases involving disputed
assessments, refunds of internal revenue taxes, fees or other charges, penalties imposed in
relation thereto, or other matters arising under the National Internal Revenue Code or other
laws or part of law administered by the Bureau of Internal Revenue;

Republic Act No. 8424, titled An Act Amending the National Internal Revenue Code, As
Amended, And For Other Purposes, later expanded the jurisdiction of the Commissioner and,
correspondingly, that of the CTA, thus:

31

SEC. 4. Power of the Commissioner to Interpret Tax Laws and to Decide Tax Cases. The power to
interpret the provisions of this Code and other tax laws shall be under the exclusive and original
jurisdiction of the Commissioner, subject to review by the Secretary of Finance.
The power to decide disputed assessments, refunds of internal revenue taxes, fees or other charges,
penalties imposed in relation thereto, or other matters arising under this Code or other laws or portions
thereof administered by the Bureau of Internal Revenue is vested in the Commissioner, subject to the
exclusive appellate jurisdiction of the Court of Tax Appeals.

The latest statute dealing with the jurisdiction of the CTA is Republic Act No. 9282.[26] It provides:
SEC. 7. Section 7 of the same Act is hereby amended to read as follows:
Sec. 7. Jurisdiction. The CTA shall exercise:
(a) Exclusive appellate jurisdiction to review by appeal, as herein provided:
(1) Decisions of the Commissioner of Internal Revenue in cases involving disputed
assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation
thereto, or other matters arising under the National Internal Revenue or other laws
administered by the Bureau of Internal Revenue;
(2) Inaction by the Commissioner of Internal Revenue in cases involving disputed
assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation
thereto, or other matters arising under the National Internal Revenue Code or other laws
administered by the Bureau of Internal Revenue, where the National Internal Revenue Code
provides a specific period of action, in which case the inaction shall be deemed a denial;
(3) Decisions, orders or resolutions of the Regional Trial Courts in local tax cases
originally decided or resolved by them in the exercise of their original or appellate
jurisdiction;
xxx
(b) Jurisdiction over cases involving criminal offenses as herein provided:
(1) Exclusive original jurisdiction over all criminal offenses arising from violations of the
National Internal Revenue Code or Tariff and Customs Code and other laws administered by
the Bureau of Internal Revenue or the Bureau of Customs: Provided, however, That offenses
or felonies mentioned in this paragraph where the principal amount of taxes and fees,
exclusive of charges and penalties, claimed is less than One million pesos (P1,000,000.00) or
where there is no specified amount claimed shall be tried by the regular courts and the
jurisdiction of the CTA shall be appellate. Any provision of law or the Rules of Court to the
contrary notwithstanding, the criminal action and the corresponding civil action for the
recovery of civil liability for taxes and penalties shall at all times be simultaneously instituted
with, and jointly determined in the same proceeding by the CTA, the filing of the criminal
action being deemed to necessarily carry with it the filing of the civil action, and no right to
reserve the filling of such civil action separately from the criminal action will be recognized.
(2) Exclusive appellate jurisdiction in criminal offenses:
(a) Over appeals from the judgments, resolutions or orders of the Regional Trial
Courts in tax cases originally decided by them, in their respected territorial
jurisdiction.
(b) Over petitions for review of the judgments, resolutions or orders of the
Regional Trial Courts in the exercise of their appellate jurisdiction over tax cases

32

originally decided by the Metropolitan Trial Courts, Municipal Trial Courts and
Municipal Circuit Trial Courts in their respective jurisdiction.
(c) Jurisdiction over tax collection cases as herein provided:
(1) Exclusive original jurisdiction in tax collection cases involving final and
executory assessments for taxes, fees, charges and penalties: Provided, however,
That collection cases where the principal amount of taxes and fees, exclusive of
charges and penalties, claimed is less than One million pesos (P1,000,000.00)
shall be tried by the proper Municipal Trial Court, Metropolitan Trial Court and
Regional Trial Court.
(2) Exclusive appellate jurisdiction in tax collection cases:
(a) Over appeals from the judgments, resolutions or orders of the
Regional Trial Courts in tax collection cases originally decided by them, in
their respective territorial jurisdiction.
(b) Over petitions for review of the judgments, resolutions or orders of
the Regional Trial Courts in the exercise of their appellate jurisdiction over
tax collection cases originally decided by the Metropolitan Trial Courts,
Municipal Trial Courts and Municipal Circuit Trial Courts, in their respective
jurisdiction.

These laws have expanded the jurisdiction of the CTA. However, they did not change the jurisdiction of
the CTA to entertain an appeal only from a final decision or assessment of the Commissioner, or in
cases where the Commissioner has not acted within the period prescribed by the NIRC. In the cases at
bar, the Commissioner has not issued an assessment of the tax liability of private respondents.
Finally, we hold that contrary to private respondents stance, the doctrines laid down in CIR v.
Union Shipping Co. and Yabes v. Flojo are not applicable to the cases at bar. In these earlier cases, the
Commissioner already rendered an assessment of the tax liabilities of the delinquent taxpayers, for
which reason the Court ruled that the filing of the civil suit for collection of the taxes due was a final
denial of the taxpayers request for reconsideration of the tax assessment.
IN VIEW WHEREOF, premises considered, judgment is rendered:
1.

In G.R. No. 120935, AFFIRMING the CA decision dated March 21, 1995, which
set aside the Regional Trial Courts Order dated August 8, 1994, and REINSTATING
Criminal Case Nos. 94-1842 to 94-1846 for further proceedings before the trial
court; and

2.

In G.R. No. 124557, REVERSING and SETTING ASIDE the Decision of the
Court of Appeals dated March 29, 1996, and ORDERING the dismissal of C.T.A.
Case No. 5075.

No costs.

33

SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC

G.R. No. L-32542 November 26, 1970

THE COMMISSIONER OF CUSTOMS and THE COLLECTOR OF CUSTOMS for the Port of Manila, petitioners,
vs.
HON. FEDERICO C. ALIKPALA, in his capacity as Judge of the Court of First Instance of Manila, Branch XXII,
GONZALO SY and TOMAS Y. DE LEON, respondents.
Office of the Solicitor General Felix Q. Antonio, Acting Assistant Solicitor General Crispin V. Bautista and Solicitor Pedro A.
Ramirez for petitioners.
Jesus G. Barrera and De Santos, Delfino and Balgos for respondents.

MAKALINTAL, J.:
The Commissioner of Customs and the Collector of Customs for the port of Manila have come to this Court on a petition
for certiorari and prohibition with preliminary injunction, to declare null and void and set aside certain orders of respondent
Court of First Instance of Manila, Judge Federico C. Alikpala presiding, in Civil Case No. 80655 entitled "Gonzalo Sy, doing
business under the name and style of Gonzalo Sy Trading, and Tomas Y. de Leon, doing business under the name and style
of T. Y. de Leon Enterprises, petitioners, vs. The Commissioner of Customs and the Collector of Customs, respondents." That
case was a petition for injunction with a prayer for a writ of preliminary injunction.
The basic order complained of is that issued on August 26, 1970, which recites the essential pertinent facts of the case and is
reproduced as follows:
On August 11, 1970, the petitioners filed an action wherein it was prayed that the Commissioner of Customs
and the Collector of Customs be restrained from carrying out the seizure and scheduled auction sale of the
fruits they imported from abroad and that the said cargo be released to them under the surety bonds which
they have already submitted to respondent Collector of Customs.
On August 13, 1970, the Court issued an order setting the hearing of the petition for the issuance of a writ of
preliminary injunction on August 19, 1970, and restraining the respondents, their agents, representatives and
attorneys in the meantime from carrying out the scheduled auction sale of the fruits imported by the
petitioners, until further orders from the Court.
The respondents filed a motion to dissolve the restraining order and an opposition to the issuance of a writ of
preliminary injunction invoking several grounds in support thereof.
It appears that the Collector of Customs of the port of Manila issued several warrants of seizure and detention
against the cargo of the petitioners consisting of apples, lemons, oranges and grapes, on the ground that they
were imported in violation of Central Bank circulars in relation to Section 2530-F of the Tariff and Customs

34
Code. In due time, the petitioners were notified of the seizure, but before they could be heard, respondent
Collector of Customs issued a notice of sale of the imported fruits which was scheduled for sale on August 10,
1970.
The petitioners filed with the Court of Tax Appeals a petition seeking a review of the action taken by the
Collector of Customs of Manila who ordered the seizure of the imported fresh fruits, with a prayer that pending
final determination of the case, a writ of preliminary injunction be issued restraining the Commissioner of
Customs and Collector of Customs from carrying out the seizure. On August 12, 1970, said Court, however,
denied the petition on the ground that it had no jurisdiction over the subject matter thereof and to grant the writ
of preliminary injunction.
Counsel for the respondents admitted that the petitioners have not been heard on the seizure proceedings
and the imported cargo have already been advertised for sale and the same would have been sold had not
this Court issued a restraining order. The first question submitted for resolution is whether the Court has
jurisdiction over the subject matter of the petition and to issue the ancillary remedy prayed for.
The question involved herein is not whether the imported fruits are subject to seizure but whether the
respondent Collector of Customs of Manila acted in accordance with law in scheduling the sale thereof
without first giving the petitioners an opportunity to be heard. In short, the question presented for resolution is
whether there was observance of due process and in the case of Nadeco vs. Collector of Customs (G.R. No.
L-19180, Oct. 31, 1963) the Supreme Court in effect held that the Court of First Instance has jurisdiction over
the subject matter of the action.
The provision of Tariff and Customs Code relied upon by the respondents in issuing the warrants of seizure is
Section 2530-F (which declares that articles of prohibited importation are subject to forfeiture) in relation to
circulars issued by the Central Bank of the Philippines beginning March 10, 1970 prohibiting the issuance of
release certificates on no-dollar imports.
Section 2301 of the Tariff and Customs Code, however, provides that upon making any seizure, the Collector
shall issue a warrant for the detention of the property, but if the owner or importer desires to secure the
release of the property for legitimate use, said official may surrender it upon the filing of a sufficient bond, in
an amount to be fixed by him, conditioned for the payment of the appraised value of the articles and/or any
fine, expenses and costs which may be adjudged in the case.
The Tariff and Customs Code further requires the Collector to give the owner or importer of the property
written notice of the seizure and an opportunity to be heard in relation thereto (Section 2303) and that
properties under seizure shall not be sold except after liability to sale shall have been established by proper
administrative or judicial proceedings in conformity with the provisions of said Code.
Evidently, the respondent Collector of Customs should not have ordered the sale at public auction of the
imported fruits until after the petitioners have been given an opportunity to be heard. Moreover, they availed of
the remedy granted them by Section 2301, which respondent Collector of Customs granted but required the
submission of a cash instead of a surety bond.
The statute under consideration (Section 2301, Tariff and Customs Code) merely provided that the release
would be upon the filing of a sufficient "bond." The petitioners affirmed that they presented to respondent
Collector of Customs surety bonds conditioned for the payment of the appraised value of the imported fruits
and/or any fine, expenses and costs which may be adjudged in the case. The attention of the petitioners have
not been called by the respondent Collector of Customs to the "insufficiency" of the bonds nor did he raise any
question as to the solvency of the bonding company.
On the basis of the foregoing facts, the Court finds that the petitioners are entitled to the relief prayed for. The
imported goods are perishable in nature and unless immediate relief is granted to petitioners, irreparable

35
damage may be caused to them and in the event petitioners' contention would be upheld, the judgment that
may be subsequently rendered would become ineffectual.
WHEREFORE, upon filing of a bond in the sum of P500, subject to the approval of the Court, let a writ of
preliminary injunction be issued enjoining the respondents, their agents, representatives and any other person
acting in their behalf from proceeding with the seizure and sale at public auction of the imported fruits, until
further orders from this Court. The respondents are further directed to release immediately the imported
goods to the custody of the petitioners on the strength of the surety bonds filed by them unless the
respondents file with this Court their objection to the sufficiency of said bonds, which should be done within
twenty-four (24) hours from notice of a copy of this order.
SO ORDERED.
On September 23, 1970 this Court gave, due course to the present petition and resolved to issue a restraining order
"enjoining respondent Judge from executing his order dated August 26, 1970 ... insofar as it directed the petitioners herein
from releasing to the custody of the respondents the imported goods in question." In due time the respondents filed their
answer to the petition and subsequently both parties submitted their respective memorandum in lieu of oral argument.
Three grounds are relied upon in the petition for the issuance of the writ prayed for, namely:
1. Respondent Court has no jurisdiction over the subject matter of the case; it follows that it does not have the
authority to grant the writ of preliminary injunction ordering the release of the imported fruits in question.
2. Assuming, ad arguendo, that it has jurisdiction over the subject matter of the case, respondent Court acted
with grave abuse of discretion amounting to lack of jurisdiction in granting the writ of preliminary injunction
despite the fact that the respondents' complaint states no cause of action upon which the grant of injunction
may be predicated.
3. Respondent Court gravely abused its discretion amounting to black of jurisdiction in insisting on the
sufficiency of the bonds filed by petitioners, undertaken by the Communications Insurance Co., Inc. in the total
amount of P513,865.46, (P513,866.06), despite the fact that its writing capacity is P50,465.52 only.
For a proper understanding and resolution of the issues it is necessary to state the facts in greater detail, as they appear from
the pleadings and memoranda submitted by the parties as well as from the different documents attached thereto and marked
as annexes.
We first take up the case of Gonzalo Sy Trading. On Nov. 19, 1968 this firm was authorized by the Central Bank, under
Monetary Board Revolution No. 2038, to import fresh fruits from Japan to the extent of $350,000.00, on a no-dollar basis and
without letters of credit. As of November 1969 the amount of $144,306.15 had been used. On October 30 of that year
Gonzalo Sy Trading asked the Central Bank for an amendment of the terms of the aforesaid resolution so that the
importations authorized under it could be procured not only from Japan but from other sources as well. On November 19,
1969 the Deputy Governor of the Central Bank denied the request, and pointed out that Monetary Board Resolution No. 2038
was intended only for the Christmas season of 1968 and did not extend through 1969. Two days thereafter, however, or on
November 21, the Director of the Foreign Exchange Department of the Central Bank wrote the Prudential Bank and Trust
Company in connection with the release certificates so far issued by it covering the no-dollar importations of fresh fruits by its
client, Gonzalo Sy Trading, and noting that only $144,306.15 had been used out of the total amount of $350,000.00,
authorized the Prudential Bank and Trust Company to "continue to issue release certificates to cover the No-Dollar
importations of fresh fruits by your client, subject to the same terms and conditions imposed by the Monetary Board under the
above-mentioned resolution." Pursuant to such authority Gonzalo Sy Trading continued importing fresh fruits, until by the
beginning of June 1970 the total amount already used was $314,142.51, leaving a balance of $35,857.49.
On June 3, 1970, Gonzalo Sy Trading wrote a letter to the Central Bank, making reference to a previous letter of May 27
requesting permission to utilize the said balance to pay for two shipments of fresh fruits coming on June 4 and 6, respectively.

36
This request was denied by the Central Bank in its letter of June 10, 1970. On the following June 16 warrants of seizure and
detention were issued by the Collector of Customs after the customs duties, taxes and other charges had been paid by the
importer.
With respect to respondent Tomas T. de Leon, it appears that on many occasions in the past he had always been allowed by
the Central Bank to import fresh fruits on a dollar co-assignment basis. The 1968 imports alone were valued at over half a
million dollars. The corresponding release certificates were invariably authorized by said bank after the arrival of the
shipments in the Philippines. On November 20, 1969 De Leon filed the customary application with the bank for the issuance
of a "no-dollar import permit" to cover consignments of fruits from suppliers abroad. Pending action on said application,
orders were placed and the shipments arrived during the months of May through July 1970, and the customs duties, taxes
and other charges were also paid by the importer. As in the case of Gonzalo Sy Trading however, the said shipments were
seized by the Collector of Customs.
On July 30, 1970 the Collector of Customs issued a notice of auction sale of the goods under seizure to be held on the
following August 12 and every day thereafter until terminated. On July 31 counsel for both importers wrote a letter to the
Collector requesting that they be allowed to file sufficient bonds for the release of the goods, without prejudice to their right to
contest the validity of seizure. On the same date the Collector granted the request by means of a handwritten marginal
notation on the letter itself, provided "duty and taxes have already been paid." This condition had been previously met, and so
the corresponding surety bonds were filed, in the aggregate amount of P513,865.46. Their approval was requested in another
letter dated August 10, 1970, but the Collector of Customs thereupon required a cash bond instead, as indicated in a similar
marginal notation on this second letter.
On the same date August 10 the two importers filed a petition with the Court of Tax Appeals to stop the sale at public
auction of the fruit shipments in question, with a prayer for preliminary injunction until the final determination of the validity of
the seizure proceedings. The said Court, however, by resolution dated August 12, 1970, dismissed the petition on the ground
of lack of jurisdiction, stating that neither the Collector of Customs nor the Commissioner of Customs had yet rendered any
decision from which an appeal could be taken pursuant to Section 7 of Republic Act, No. 1125. Evidently anticipating such a
ruling and considering the urgency of the matter, the importers went to the Court of First Instance on a petition for injunction,
wherein the resolution reproduced in the beginning of this decision was thereafter promulgated after hearing.
That there must be some forum to which a party may apply for relief from an alleged violation or denial of his rights is a legal
principle from which there can be no dissent. Otherwise the rule of law would be defeated. The choice in this case was
between the Court of Tax Appeals and the Court of First Instance. Recourse to the former was sought and denied. The Tax
Court held that it could not issue the preliminary injunction prayed for except in the exercise of its appellate jurisdiction, and
no appeal had been taken since no appealable decision had been rendered. The ruling appears to find support in the
decisions of this Court, thus:
... Nowhere does the law expressly vest in the Court of Tax Appeals original jurisdiction to issue writs of
prohibition or injunction independently of, and apart from, an appealed case. The writ of prohibition or
injunction that it may issue under the provisions of section 11, Republic Act No. 1125, to suspend the
collection of taxes, is merely ancillary to and in furtherance of its appellate jurisdiction in the cases mentioned
in section 7 of the Act. The power to issue the writ exists only in cases appealed to it. This is reflected in the
explanatory note of the bill (House No. 175), creating the Court of Tax Appeal. (Coll. of Int. Rev. v. Yuseco,
G.R. No. L-12518, Oct. 28, 1961.)
Respondent Court of First Instance assumed jurisdiction over the petition before it on the ground that "the question presented
for resolution (was) whether there was absence of due process," citing our decision in Nadeco vs. Collector of Customs, G.R.
No.
L-19180, Oct. 31, 1969. The said Court found: "Counsel for the respondents admitted that the petitioners have not been
heard on the seizure proceedings and the imported cargo have already been advertised for sale and some would have been
sold had not this Court issued a restraining order." Due notice and hearing, besides being an inherent element of due
process, is provided for in Section 2303 of the Tariff and Customs Code, which requires the Collector to give the owner or
importer of the property written notice of the seizure and an opportunity to be heard in relation to the delinquency which was

37
the occasion for such seizure, as well as in Section 2601, which directs that seized property, other than contraband, shall be
subject to sale after liability to sale shall have been established by proper administrative or judicial proceedings in conformity
with the provisions of said Code.
In view of the foregoing, we hold that respondent Court of First Instance had jurisdiction to take cognizance of the petition for
injunction before it. The remedy prayed for was one in equity, which the petitioner below tried to seek in the Court of Tax
Appeals, but was denied on the ground that no appealable decision had yet been rendered by the Collector and the
Commissioner of Customs. The jurisdiction of respondent Court was not invoked to determine the validity of the seizure
proceedings, which are pending before the Collector of Customs and regarding which an appeal could be eventually taken
only to the Tax Court, but rather to stop the projected auction sale of the goods in question and secure the release thereof
under surety bond, without prejudice to the main issue concerning the validity of the seizure. Such relief is interlocutory in
nature, and is sanctioned by Section 2301 of the Tariff and Customs Code, which provides that "upon making any seizure the
Collector shall issue a warrant for the detention of the property; but if the owner or importer desires to secure the release of
the property for legitimate use, the Collector may surrender it upon the filing of a sufficient bond, in an amount to be fixed by
him, conditioned for payment of the appraised value of the article and/or any fine, expenses and costs which may be
adjudged in the case."
The really basic issue before us is whether or not respondent Court gravely abused its discretion in issuing the orders
complained of, particularly that dated August 26, 1970. For the resolution of this issue we need not pass squarely upon the
question of whether the importations in question are prohibited by law within the meaning of the proviso in Section 2301 of
the Tariff and Customs Code which says that such prohibited importation may not be released under bond. That question is
involved and should properly be decided in the seizure proceedings. For purposes of the equitable remedy of injunction
granted by respondent Court, however, as well, as of the petition for certiorari and prohibition before us, it is sufficient to note,
first, that there is no clear showing that the importations subject of seizure are prohibited by law; and second, that the
Collector of Customs has in fact agreed in the beginning to release the importations provided surety bonds were filed,
although he subsequently required a cash bond instead.
The warrants of seizure were issued in view of Central Bank Circulars Nos. 294 and 295, promulgated on March 10 and 20,
1970, respectively, which provide that "no-dollar imports not covered by Circular No. 247 shall not be issued any release
certificates and shall be referred to the Central Bank for official transmittal to the Bureau of Customs for appropriate seizure
proceedings."
Evidently, in the opinion of the Collector of Customs himself, even in the light of those circulars there exists no legal
impediment to the release of the subject importations under bond, otherwise he would not have agreed thereto, although he
changed his requirement from surety bond to cash. In any case, as pointed out by private respondents, the said importations
had been ordered before Central Bank Circulars 294 and 295 were promulgated, and since the orders were made in
accordance with previous practice there could be no bad faith or intent to violate those circulars.
The options presented in this case are few and clearcut: (1) to sell the imported fresh fruits at public auction, as the
petitioners due insist; (2) to release them to the private respondents upon the filing of sufficient surety bonds, as respondent
Court has directed; and (3) to require the private respondents to file a cash bond instead.
We fail to see what good it would do either the Government or the private respondents to have the fruits sold at public
auction. The Government's interest, ultimately, is in the proceeds which may be realized from such sale, in the event the fruits
are declared forfeited in the seizure proceedings. By now a considerable portion thereof must have deteriorated, and the rest
will in all probability not command the same prices as before. Besides, as pointed out by the respondents and this has not
been denied the Commissioner of Customs has been quoted by a newspaper on September 29, 1970, to the effect that
"seized items worth hundreds of thousands of pesos could not be disposed of because of the unrealistic bids received by the
Bureau of Customs when the goods were offered for sale at public auction. ... Some of the offers were not even enough to
pay the import taxes and customs duties due on the articles." To sell the goods at public auction, therefore, cannot but entail
great loss either to the Government or to the importers.

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On the other hand the filing of sufficient bond would serve the purpose envisaged, that is, protect the interest of the
Government in the value of the imported goods should they be finally declared forfeited, while at the same time avoiding
needless damage or prejudice to the importers should the forfeiture fail. The release on bond, it may be repeated, is
expressly authorized by Section 2301 of the Tariff and Customs Code.
But the petitioners would have the private respondents put up cash, alleging that it may be difficult to realize upon a surety
bond if it is allowed. We do not believe this reason is justified. In the first place, a bond, when required by law, is commonly
understood to mean an undertaking that is sufficiently secured, and not cash or currency. According to the respondents this is
the established practice in the Bureau of Customs, and this statement has not been denied. Of course whatever surety bonds
are submitted by the importers are subject to any objections by the Collector of Customs as to their sufficiency or as to the
solvency of the bondsman. In the second place, to require the private respondents here to put up cash in the sum of
P513,865.46 is prohibitive and unrealistic, and amounts to an arbitrary exercise of discretion under the circumstances of this
case, assuming that the matter is discretionary.
We note, however, that the bonds offered by the respondents are all subscribed by the same bonding company, namely, the
Communications Insurance Co., Inc., which has a net worth of only P504,655.15 and a maximum writing capacity of
P50,465.52, on the basis of its financial statement as of December 31, 1969, according to a letter of the Acting Insurance
Commissioner dated August 28, 1970. The figure given by the petitioners in their objection to the sufficiency of the bonds
before respondent court is P596,342.51 in reference to the net worth of said company. In any case the petitioners have
expressed doubts as to whether the bondsman can satisfy a liability of P513,865.46, which is the aggregate amount of the
bonds submitted. The objection on this ground has been brushed aside by the lower court in its order of September 8, 1970,
since the private respondents "have shown that the bonding company obtained reinsurance on part of their liability for those
bonds." But it appears, as manifested by said respondents themselves, that only two of the bonds submitted by them, in the
respective amounts of P94,647.80 and P78,981.24, are covered by reinsurance, leaving more than P340,000.00 not
reinsured. In view thereof, it is incumbent upon the respondents to either cause of sufficient portion of the other bonds
submitted by it to be covered by reinsurance or to put up other surety bonds acceptable to the Collector of Customs, the
same to be justified before respondent Court in case of dispute.
WHEREFORE, subject to the condition stated in the preceding paragraph, the writ prayed for is denied, the petition
dismissed, and the restraining order issued by this Court hereby lifted. No pronouncement as to costs.