G.R. No. 224764, 24 April 2017

FACTS:

On December 23, 2011, respondent Lepanto Ceramics, Inc. (LCI) – a corporation duly organized and existing under Philippine Laws with principal office address in Calamba City, Laguna – filed a petition 4 for corporate rehabilitation pursuant to Republic Act No. (RA) 10142, 5 otherwise known as the “Financial Rehabilitation and Insolvency Act (FRIA) of 2010,” docketed before the RTC ofCalamba City, Branch 34, the designated Special Commercial Court in Laguna (Rehabilitation Court). Essentially, LCI alleged that due to the financial difficulties it has been experiencing dating back to the Asian financial crisis, it had entered into a state of insolvency considering its inability to pay its obligations as they become due and that its total liabilities amounting to ₱4,213 ,682, 715. 00 far exceed its total assets worth ₱1,112,723,941.00. Notably, LCI admitted in the annexes attached to the aforesaid Petition its tax liabilities to the national government in the amount of at least ₱6,355,368.00.

On January 13, 2012, the Rehabilitation Court issued a Commencement Order,7 which, inter alia:

(a) declared LCI to be under corporate rehabilitation;
(b) suspended all actions or proceedings, in court or otherwise, for the enforcement of claims against LCI;
(c) prohibited LCI from making any payment of its liabilities outstanding as of even date, except as may be provided under RA 10142; and
(d) directed the BIR to file and serve on LCI its comment or opposition to the petition, or its claims against LCI.

Accordingly, the Commencement Order was published in a newspaper of general circulation and the same, together with the petition for corporate rehabilitation, were personally served upon LCI’s creditors, including the BIR.

Despite the foregoing, Misajon, et al., acting as Assistant Commissioner, Group Supervisor, and Examiner, respectively, of the BIR’s Large Taxpayers Service, sent LCI a notice of informal conference dated May 27, 2013, informing the latter of its deficiency internal tax liabilities for the Fiscal Year ending June 30, 2010. In response, LCI’s court-appointed receiver, Roberto L. Mendoza, sent BIR a letter-reply, reminding the latter of the pendency of LCI’s corporate rehabilitation proceedings, as well as the issuance of a Commencement Order in connection therewith. Undaunted, the BIR sent LCI a Formal Letter of Demand dated May 9, 2014, requiring LCI to pay deficiency taxes in the amount of P567,519,348.39.

ISSUE:

Whether or not the BIR can collect the deficiency taxes while rehabilitation proceedings are ongoing?

RULING:

No.

Verily, the inherent purpose of rehabilitation is to find ways and means to minimize the expenses of the distressed corporation during the rehabilitation period by providing the best possible framework for the corporation to gradually regain or achieve a sustainable operating form. “[It] enable[s] the company to gain a new lease in life and thereby allow creditors to be paid [t]heir claims from its earnings. Thus, rehabilitation shall be undertaken when it is shown that the continued operation of the corporation is economically more feasible and its creditors can recover, by way of the present value of payments projected in the plan, more, if the corporation continues as a going concern than if it is immediately liquidated.

In order to achieve such objectives, Section 16 of RA 10142 provides, inter alia, that upon the issuance of a Commencement Order – which includes a Stay or Suspension Order – all actions or proceedings, in court or otherwise, for the enforcement of “claims” against the distressed company shall be suspended. Under the same law, claim “shall refer to all claims or demands of whatever nature or character against the debtor or its property, whether for money or otherwise, liquidated or unliquidated, fixed or contingent, matured or unmatured, disputed or undisputed, including, but not limited to;

(1) all claims of the government, whether national or local, including taxes, tariffs and customs duties; and
(2) claims against directors and officers of the debtor arising from acts done in the discharge of their functions falling within the scope of their authority: Provided, That, this inclusion does not prohibit the creditors or third parties from filing cases against the directors and officers acting in their personal capacities.”

In the case at bar, it is undisputed that LCI filed a petition for corporate rehabilitation. Finding the same to be sufficient in form and substance, the Rehabilitation Court issued a Commencement Order dated January 13, 2012 which, inter alia:

(a) declared LCI to be under corporate rehabilitation;
(b) suspended all actions or proceedings, in court or otherwise, for the enforcement of claims against LCI;
(c) prohibited LCI from making any payment of its outstanding liabilities as of even date, except as may be provided under RA 10142; and
(d) directed the BIR to file and serve on LCI its comment or opposition to the petition, or its claims against LCI.

It is likewise undisputed that the BIR – personally and by publication – was notified of the rehabilitation proceedings involving LCI and the issuance of the Commencement Order related thereto.

Despite the foregoing, the BIR, through Misajon, et al., still opted to send LCI:

(a) a notice of informal conference31 dated May 27, 2013, informing the latter of its deficiency internal tax liabilities for the Fiscal Year ending June 30, 2010; and

(b) a Formal Letter of Demand32 dated May 9, 2014, requiring LCI to pay deficiency taxes in the amount of P567,5 l 9,348.39, notwithstanding the written reminder coming from LCI’s court-appointed receiver of the pendency of rehabilitation proceedings concerning LCI and the issuance of a commencement order. Notably, the acts of sending a notice of informal conference and a Formal Letter of Demand are part and parcel of the entire process for the assessment and collection of deficiency taxes from a delinquent taxpayer,33 – an action or proceeding for the enforcement of a claim which should have been suspended pursuant to the Commencement Order. Unmistakably, Misajon, et al. ‘s foregoing acts are in clear defiance of the Commencement Order.

Petitioners’ insistence that: (a) Misajon, et al. only performed such acts to toll the prescriptive period for the collection of deficiency taxes; and (b) to cite them in indirect contempt would unduly interfere with their function of collecting taxes due to the government, cannot be given any credence. As aptly put by the RTC Br. 35, they could have easily tolled the running of such prescriptive period, and at the same time, perform their functions as officers of the BIR, without defying the Commencement Order and without violating the laudable purpose of RA 10142 by simply ventilating their claim before the Rehabilitation Court.34 After all, they were adequately notified of the LCI’s corporate rehabilitation and the issuance of the corresponding Commencement Order. In sum, it was improper for Misajon, et al. to collect, or even attempt to collect, deficiency taxes from LCI outside of the rehabilitation proceedings concerning the latter, and in the process, willfully disregard the Commencement Order lawfully issued by the Rehabilitation Court. Hence, the RTC Br. 35 correctly cited them for indirect contempt.

*Case Digest by Mary Tweetie Antonette G. Semprun, JD – IV, Andres Bonifacio College, SY 2019 – 2020