CASE NO. 2011-0088: REPUBLIC OF THE PHILIPPINES VS. JUANITO MANIMTIM, JULIO UMALI, REPRESENTED BY AURORA U. JUMARANG, SPOUSES EDILBERTO BAÑANOLA AND SOFIA BAÑANOLA, ZENAIDA MALABANAN, MARCELINO MENDOZA, DEMETRIO BARRIENTOS, FLORITA CUADRA, AND FRANCISCA MANIMTIM (G.R. NO. 169599, 16 MARCH 2011, MENDOZA, J.) SUBJECT: APPLICATION FOR REGISTRATION OF TITLE (BRIEF TITLE: REPUBLIC VS. MANIMTIM ET AL.)

                         SECOND DIVISION

x —————————————————————————————————x

D E C I S I O N

MENDOZA, J.:

Assailed in this petition is the September 5, 2005 Decision^[1] of the Court of Appeals (CA) in CA-G.R. CV No. 74720, which reversed and set aside the February 15, 2000 Amended Judgment^[2] of the Regional Trial Court, Branch 18, Tagaytay City (RTC), and reinstated the March 31, 1997 Judgment^[3] granting the respondents’ application for registration of Lot 3857 but deferring the approval of the application for Lot 3858.

The Facts

Records show that on December 3, 1991, Juanito Manimtim, Julio Umali, Spouses Edilberto Bañanola and Sofia Bañanola, Zenaida Malabanan, Marcelino Mendoza, Demetrio Barrientos, Florita Cuadra, and Francisca Manimtim (respondents) filed with the RTC two applications for registration and confirmation of their title over two (2) parcels of land, designated as Lot 3857 (Ap-04-006225) with an area of 38,213 square meters and Lot 3858 (Ap-04-006227) with an area of 9,520 square meters, located in Barangay Sungay, Tagaytay City.

Julio Umali died while the case was pending and he was substituted by his heirs namely: Guillermo, Jose, Gerardo, Meynardo, Jacinto, and Ernesto, all surnamed Umali, and Aurora Umali-Jumarang.

The respondents alleged that they are the owners pro indiviso and in fee simple of the subject parcels of land; that they have acquired the subject parcels of land by purchase or assignment of rights; and that they have been in actual, open, public, and continuous possession of the subject land under claim of title exclusive of any other rights and adverse to all other claimants by themselves and through their predecessors-in-interest since time immemorial.

In support of their applications, the respondents submitted blueprint plans of Lot 3857 and Lot 3858, technical descriptions, certifications in lieu of lost geodetic engineer’s certificates, declarations of real property tax, official receipts of payment of taxes, real property tax certifications, and deeds of absolute sale.

The RTC set the initial hearing of the case on May 20, 1992 after compliance with all the requirements of the law regarding publication, mailing and posting.

On February 19, 1992, the Republic of the Philippines, through the Office of the Solicitor General (OSG), opposed the respondents’ twin application on the following grounds:

1] Neither the applicants nor their predecessors-in-interest have been in open, continuous, exclusive, and notorious possession and occupation of the land in question since June 12, 1945 or prior thereto;

2] The muniments of title, that is, tax declaration and tax receipts, attached to or alleged in the application, do not constitute competent and sufficient evidence of a bona fide acquisition of the land applied for registration;

3] This is a claim of ownership on the basis of a Spanish title or grant, which has been barred as a mode of proving acquisition; and

4] The land is part of the public domain belonging to the Republic of the Philippines, which is not subject to private appropriation.^[4]

On May 15, 1992, the Land Registration Authority (LRA) transmitted to the RTC a report dated April 29, 1992 stating that there were discrepancies in Plans Ap-04-006225 (Lot 3857) and Ap-04-006227 (Lot 3858) and referred the matter to the Land Management Sector (LMS), now called the Land Management Bureau of the Department of Environment and Natural Resources(DENR), for verification and correction.

On May 20, 1992, Moldex Realty, Inc. (MOLDEX) opposed the applications on the ground that it is the registered owner of a parcel of land designated as Lot 4, Psu-108624 and technically described in Transfer Certificate of Title (TCT) No. T-20118 and that the metes and bounds of Lot 3857 and Lot 3858 overlapped its lot by about 14,088 square meters. MOLDEX, therefore, prayed that the overlapping portion be excluded from the applications.

On June 30, 1993, the respondents and MOLDEX filed a joint motion requesting the RTC to appoint a team of commissioners composed of a government representative from the Survey Division, LMS, DENR; Engr. Vivencio L. Valerio, representing the respondents; and Engr. Romeo Durante, representing MOLDEX, to conduct an actual ground verification and relocation survey to assist the RTC in resolving the controversy on the location and position of the subject lots. On that same day, the RTC granted the joint motion and directed the team of commissioners to submit its findings within 15 days after the termination of the ground verification and relocation survey.

On January 19, 1995, Robert C. Pangyarihan, the Chief of Survey Division, LMS, DENR, transmitted to the RTC the report of Engr. Alexander L. Jacob (Engr. Jacob), based on the verification and relocation survey he conducted in the presence of the respondents and MOLDEX, which found an encroachment or overlapping on Lot 4, Psu-108624. The report stated the following findings and recommendations:

3.5. Lot 4, Psu-108624 is an older approved survey previously decreed and, therefore, it is the survey which was encroached upon or overlapped by Lot 1, Psu-176181;Lot 1, Psu-176182; and Lot 1 & 2 Psu-176184.

                         4. RECOMMENDATIONS

4.1 In view of the foregoing findings of encroachment on  decreed survey, the portions labeled as “A” “B” “C” and “D”     should be segregated from Lot 1, Psu-176181; Lot 1 & 2, 176184; and Lot 1 & 2 Psu-176182; respectively, which process involves the amendment of said plans to be submitted for approval by the Regional Office.

4.2 It is further recommended that the point of reference or “tie point” of Lot 1, Psu-176181, Lot 1, Psu-176182, Lot 1, Psu-176182 and Lot 3, Psu-176181 be changed to BLLM No. 5, Tagaytay Cadastre, the said amendment being warranted by the findings of this verification survey thru direct traverse connection of the corner boundaries of said lots from BLLM No. 5 which is relatively near to subject lots.^[5]

On March 31, 1997, the RTC handed down its Judgment granting the respondents’ application for registration of Lot 3857 of Plan Ap-04-006227 but deferred the approval of registration of Lot 3858 pending the segregation of 4,243 square meter portion thereof which was found to belong to MOLDEX.

On April 29, 1997, the respondents filed a motion for partial new trial on the following grounds:

1] Newly discovered evidence explaining that when they were in the process of amending plan Ap-04-006227 of Lot 3858, they found out that the sketch plan that was furnished to them by the LRA, upon their request, showed no overlapping between their property and that of MOLDEX; and

2] Insufficiency of evidence because the plan prepared by Engr. Jacob, which was the basis of his report, was not signed by the respondents or their representatives and the LRA was not informed of these developments.

On October 27, 1997, Director Felino M. Cortez (Director Cortez) of the LRA Department of Registration transmitted a supplementary report to the RTC dated October 1, 1997, which found that Lot 3858 did not encroach on MOLDEX’s property. Likewise, the supplementary report made the following recommendations:

1. To approve the correction made by the Lands Management Sector on the boundaries of Lot 3858, Cad. 355 along lines 2-3 and 9-1 which is Lot 4-B, Psu-105624 Amd. as mentioned in paragraph 2 hereof; and

2. The judgment dated March 31, 1997 with respect to Lot 3858, Cad. 355 item #2 of the dispositive portion be amended accordingly.^[6]

On January 29, 1998, MOLDEX filed an opposition to the respondents’ motion for partial new trial for lack of a supporting affidavit of the witness by whom such evidence would be given or a duly authenticated document which was supposed to be introduced in evidence as required by Section 2, Rule 37 of the Revised Rules of Court.

On September 3, 1998, the RTC granted the respondents’ motion for partial new trial.

On February 15, 2000, the RTC, after due hearing and pleadings submitted by the parties, rendered an Amended Judgment by also approving the application for the confirmation and registration of Lot 3858 of Plan Ap-04-006227, Cad. 355, Tagaytay Cadastre, Barangay Sungay, Tagaytay City.

The OSG and MOLDEX filed their respective appeals with the CA based on the following

                        ASSIGNMENT OF ERRORS

For MOLDEX:

THE TRIAL COURT GRAVELY ERRED IN APPROVING THE APPLICATION FOR REGISTRATION OF LOT 3858 DESPITE FINDINGS OF ENCROACHMENT BASED ON ACTUAL GROUND VERIFICATION SURVEY CONDUCTED PURSUANT TO ITS OWN ORDER.

THE TRIAL COURT GRAVELY ERRED IN GIVING CREDENCE TO THE SUPPLEMENTARY REPORT DATED 1 OCTOBER 1997 ISSUED BY THE LRA THRU DIRECTOR FELINO CORTEZ.

THE TRIAL COURT GRAVELY ERRED IN SETTING ASIDE THE REPORT ON THE ACTUAL GROUND VERIFICATION SURVEY PREPARED BY ENGR. ALEXANDER JACOB DESPITE COMPLETE ABSENCE OF ANY EVIDENCE TO CONTRADICT ITS VERACITY AND CORRECTNESS.

THE TRIAL COURT GRAVELY ERRED IN RULING THAT DENIAL OF THE REGISTRATION FOR LOT 3858 WILL VIOLATE SECTION 19, PARAGRAPH 2 OF P.D. 1529.

For the OSG:

THE TRIAL COURT ERRED IN GRANTING THE APPLICATION FOR REGISTRATION OF ORIGINAL TITLE FOR FAILURE OF THE APPELLEES TO SUBMIT IN EVIDENCE THE ORIGINAL TRACING CLOTH PLAN OR SEPIA OF THE LAND APPLIED FOR.

THE TRIAL COURT ERRED IN FINDING THAT APPELLEES, BY THEMSELVES AND THROUGH THEIR PREDECESSORS-IN-INTEREST, HAVE BEEN IN POSSESSION OF THE DISPUTED LANDS IN THE CONCEPT OF OWNER, OPENLY AND ADVERSELY FOR THE PERIOD REQUIRED BY LAW.

On September 5, 2005, the CA reversed and set aside the February 15, 2000 Amended Judgment of the RTC and reinstated its earlier March 31, 1997 Judgment. The dispositive portion of the CA Decision reads:

WHEREFORE, the February 15, 2000 Amended Judgment of the Regional Trial Court of Tagaytay City, Branch 18 is hereby REVERSED and SET ASIDE and in its stead, the earlier March 31, 1997 Judgment is hereby REINSTATED whereby registration as to LOT 3857 is hereby APPROVED while registration as to LOT 3858 is hereby DENIED until such time that the encroachment on the land of MOLDEX REALTY, INC. is separated and removed.

The CA held, among others, that the January 19, 1995 Report made by Engr. Jacob of the LMS, DENR was more reliable than the supplementary report dated October 1, 1997 of Director Cortez of the Department of Registration, LRA. The CA reasoned out that the January 19, 1995 Report which found that Lot 3858 encroached on the property of MOLDEX was based on an actual field verification and actual relocation survey ordered by the RTC upon joint motion of the parties. On the other hand, the supplementary report dated October 1, 1997 which found no encroachment was only based on an unreliable “table survey” of existing data and plans which were actually not verified in the field.

The CA likewise ruled that although the respondents failed to submit in evidence the original tracing cloth plan or sepia of the subject lots (Lots 3857 and 3858), these were sufficiently identified with the presentation of the blueprint copy of Plans Ap-04-006225 and Ap-04-006227 and the technical descriptions duly certified by the Land Management Bureau.

Hence, the OSG filed this petition.

ISSUE

WHETHER OR NOT THE COURT OF APPEALS ERRED IN REINSTATING THE MARCH 31, 1997 DECISION OF THE REGIONAL TRIAL COURT WHICH APPROVED THE APPLICATION FOR REGISTRATION OF LOT 3857 BUT DEFERRED THE APPROVAL OF REGISTRATION OF LOT 3858. 

The OSG argues that the respondents have not shown a registrable right over Lot 3857.  According to the OSG, respondents’ evidence is insufficient to establish their alleged possession over Lot 3857 to warrant its registration in their names. Despite their claim that their predecessors-in-interest have been in possession of Lot 3857 for over 40 years at the time of their application for registration in December 1991, it appears that their possession only started in 1951 which falls short of the legal date requirement of possession, that is, since June 12, 1945 or earlier.  The respondents simply made a general statement that their possession and that of their predecessors-in-interest have been adverse, continuous, open, public, peaceful and in the concept of an owner for the required number of years. Their general statements simply lack supporting evidence.

The OSG further contends that the respondents’ claim over the subject lots suffer from the following infirmities, to wit:

1]  The alleged deed of absolute sale upon which Juanito Manimtim (Juanito) anchors his claim over the lot is a mere xerox copy and mentions only an area of 6,225 square meters and not 11, 577.44 square meters as claimed by him.

2] The signature appearing in the deed of sale as allegedly belonging to Julio Umali as vendor is actually that of his daughter, Aurora, who, as far as Juanito knows, was not authorized to sign for and in behalf of her father.

3] Likewise, in the case of Edilberto Bañanola, the alleged deed of absolute sale upon which he banks his claim on the subject land is a mere xerox copy.

4] Jacinto and Isabelo Umali, claiming that they inherited the land they seek to be registered in their names, have not adduced any evidence to substantiate this claim.

5) As to Eliseo Granuelas, representing Zenaida Malabanan, he failed to present any instrument to substantiate her claim that her parents bought the claimed property from Julio Umali.

On the other hand, the respondents aver that the petition violates Section 2, Rule 45 of the Rules of Court because the CA decision dated September 5, 2005 is not yet final in view of the unresolved issues raised in their motion for reconsideration dated September 27, 2005. The respondents likewise claim that the RTC decision dated February 15, 2000 refers only to Lot 3858, Plan Ap-04006227 and that it was promulgated in accordance with the fundamental requirements in the land registration of Commonwealth Act No. 141 and Presidential Decree (P.D.) No. 1529.

They further argue that the OSG, represented by the City Prosecutor of Tagaytay, did not raise the issues, currently put forward by the OSG, in all the hearings before the RTC. Neither did the OSG contest the respondents’ possession of Lot 3858 and 3857. In fact, Lot 3858, Plan Ap-04-006227, together with the other adjoining lots, is originally listed in the original copy of the tracing cloth of Tagaytay Cadastre Map as those belonging to the respondents’ grandmother, Agapito Magsumbol, and/or Julio Umali.

Finally, the respondents aver that insofar as Lot No. 3857 is concerned, Original Certificate of Title No. 0-741 was issued in their names pursuant to the decision dated March 31, 1997 and that the derivative transfer certificates of title were already registered in their names in compliance with the order for the issuance of the decree dated December 14, 1998 issued by the Land Registration Court in LRC No. TG-399.

In reply, the OSG asserts that the issue raised by the respondents has been rendered moot with the denial by the CA of their motion for reconsideration in its resolution dated March 13, 2006. The OSG further claims that under the Regalian Doctrine, all lands of whatever classification belong to the state. Hence, the respondents have the burden to show, even in the absence of an opposition, that they are the absolute owners of the subject lots or that they have continuously possessed the same under claim of ownership since June 12, 1945.

The Court’s Ruling 

           In its September 5, 2005 Decision, the CA ruled in favor of the respondents by approving their application for registration ofLot 3857 but denying their application for registration of Lot 3858 until such time that the encroachment on the land of MOLDEX would have been separated and removed. The CA, however, did not rule on the second and more important issue of whether the respondents were qualified for registration of title.

 After going over the records, the Court agrees with the OSG that the respondents indeed failed to sufficiently prove that they are entitled to the registration of the subject lands.

          Sec. 14(1) of P.D. No. 1529^[7] in relation to Section 48(b) of Commonwealth Act 141, as amended by Section 4 of P.D. No. 1073,^[8] provides:

SEC. 14.  Who may apply.—The following persons may file in the proper Court of First Instance [now Regional Trial Court] an application for registration of title to land, whether personally or through their duly authorized representatives:

(1) Those who by themselves or through their predecessors-in-interest have been in open, continuous, exclusive and notorious possession and occupation of alienable and disposable lands of the public domain under a bona fide claim of ownership since June 12, 1945, or earlier.

           X  x  x

Section 48. The following described citizens of the Philippines, occupying lands of the public domain or claiming to own any such lands or an interest therein, but whose titles have not been perfected or completed, may apply to the Court of First Instance [now Regional Trial Court] of the province where the land is located for confirmation of their claims and the issuance of a certificate of title therefor, under the Land Registration Act, to wit:

          X  x  x

(b) Those who by themselves or through their predecessors-in-interest have been in open, continuous, exclusive and notorious possession and occupation of agricultural lands of the public domain, under a bona fide claim of acquisition of ownership, since June 12, 1945, or earlier, immediately preceding the filing of the application for confirmation of title except when prevented by war or force majeure. These shall be conclusively presumed to have performed all the conditions essential to a Government grant and shall be entitled to a certificate of title under the provisions of this chapter. [Emphasis supplied]

          Based on these legal parameters, applicants for registration of title under Section 14(1) must sufficiently establish: (1) that the subject land forms part of the disposable and alienable lands of the public domain; (2) that the applicant and his predecessors-in-interest have been in open, continuous, exclusive and notorious possession and occupation of the same; and (3) that it is under abona fide claim of ownership since June 12, 1945, or earlier.^[9] These the respondents must prove by no less than clear, positive and convincing evidence.^[10]

In the case at bench, the respondents failed to establish that the subject lots were disposable and alienable lands.

 Although respondents attached a photocopy of a certification^[11] dated August 16, 1988 from the District Land Officer, LMS, DENR, attesting that the subject lots were not covered by any public land applications or patents, and another certification^[12]dated August 23, 1988 from the Office of the District Forester, Forest Management Bureau, DENR, attesting that the subject lots have been verified, certified and declared to be within the alienable or disposable land of Tagaytay City on April 5, 1978, they were not able to present the originals of the attached certifications as evidence during the trial.  Neither were they able to present the officers who issued the certifications to authenticate them.

A careful scrutiny of the respondents’ Offer of Evidence^[13] would show that only the following were offered as evidence:

1)    blue print plans of AP-04-006225 and AP-04-006227

2)    technical descriptions of Lot 3857 and 3858 

3)    surveyor’s certificates for Lot 3857 and 3858

4)    photo-copy of the deed of sale dated September 17, 1971

5)    jurisdictional requirements of posting and publication

6)    tax declarations

7)    tax receipts

Hence, there is no proof that the subject lots are disposable and alienable lands.

Moreover, the records failed to show that the respondents by themselves or through their predecessors-in-interest have been in open, exclusive, continuous, and notorious possession and occupation of the subject lands, under a bona fide claim of ownership since June 12, 1945 or earlier.

          The respondents presented the testimonies of Juanito Manimtim (Juanito), Edilberto Bañanola, Jacinto Umali, Eliseo Ganuelas, Isabelo Umali, and Engr. Vivencio Valerio and tax declarations to prove possession and occupation over the subject lots. These declarations and documents, however, do not suffice to prove their qualifications and compliance with the requirements.

          Juanito testified, among others, that he is a co-owner of the subject lots^[14] and that his ownership covers about 11,577.14 square meters of the subject lots;^[15] that he acquired his possession through a deed of absolute sale^[16] dated September 17, 1971 from Julio Umali (Julio);^[17] that the 11,577.14 square meter property has been covered by three (3) tax declarations;^[18] and that his great grandparents were in possession of the subject lots for a period of 40 years.^[19]

          Juanito, however, could not show a duplicate original copy of the deed of sale dated September 17, 1991. Moreover, a closer look at the deed of absolute sale dated September 17, 1991 would show that, for and in consideration of the amount of P10,000.00, the sale covered only an area of 6,225 square meters of Lot 1, Plan Psu-176181 (Lot 3858) and not 11,577.44 square meters as claimed. Juanito explained that only the 6,225 square meter portion (Tax Declaration No. 018-0928)^[20] was covered by the subject deed of absolute sale while the two (2) other portions (Tax Declaration No. 018-0673 and Tax Declaration No. 018-0748 covering 2,676.40 square meters each)^[21] were not covered by any deed of sale because Julio knew that these other portions were already owned by him (Juanito).^[22] So, no deed of sale was executed between the two of them after he paid Julio the price for the portions covered by Tax Declaration No. 018-0673 and Tax Declaration No. 018-0748.^[23] He was not able to show, however, any other document that would support his claim over the portions beyond 6,225 square meters.

In any event, Juanito failed to substantiate his general statement that his great grandparents were in possession of the subject lots for a period of over 40 years. He failed to give specific details on the actual occupancy by his predecessors-in-interest of the subject lots or mode of acquisition of ownership for the period of possession required by law. It is a rule that general statements that are mere conclusions of law and not factual proof of possession are unavailing and cannot suffice. An applicant in a land registration case cannot just harp on mere conclusions of law to embellish the application but must impress thereto the facts and circumstances evidencing the alleged ownership and possession of the land.^[24]

Like Juanito, the testimonies of Edilberto Bañanola, Jacinto Umali, Eliseo Ganuelas, and Isabelo Umali were all unsubstantiated general statements.

Edilberto Bañanola (Edilberto) claims that he owns a portion of Lot 3857 based on Tax Declaration No. GR-018-1058-R^[25]covering 5,025 square meters and Tax Declaration No. GR-018-1059-R^[26] covering 6,225 square meters.^[27] According to him, he bought the subject property from Hilarion Maglabe and Juanito Remulla through a deed of absolute sale^[28] dated February 6, 1978.^[29] To prove the same, he presented several tax declarations^[30] in the names of Hilarion Maglabe and Juanito Remulla. He further asserts that he has been in actual, continuous and uninterrupted possession of the subject property since he purchased it in 1978.^[31]

Like Juanito, however, Edilberto failed to present a duplicate original copy of the deed of sale dated February 6, 1978 and validate his claim that he himself and his predecessors-in-interest have been in open, exclusive, continuous, and notorious possession and occupation of the subject land, under a bona fide claim of ownership since June 12, 1945 or earlier.

As for Jacinto Umali and Eliseo Ganuelas, they likewise failed to authenticate their claim of acquisition through inheritance and acquisition through purchase, respectively.

Apparently, the respondents’ best evidence to prove possession and ownership over the subject property were the tax declarations issued in their names. Unfortunately, these tax declarations together with their unsubstantiated general statements and mere xerox copies of deeds of sale are not enough to prove their rightful claim. Well settled is the rule that tax declarations and receipts are not conclusive evidence of ownership or of the right to possess land when not supported by any other evidence.  The fact that the disputed property may have been declared for taxation purposes in the names of the applicants for registration or of their predecessors-in-interest does not necessarily prove ownership.  They are merely indicia of a claim of ownership.^[32]

Finally, the fact that the public prosecutor of Tagaytay City did not contest the respondents’ possession of the subject property is of no moment. The absence of opposition from government agencies is of no controlling significance because the State cannot be estopped by the omission, mistake or error of its officials or agents.^[33]

WHEREFORE, the petition is GRANTED. Accordingly, the September 5, 2005 Decision of the Court of Appeals in CA-G.R. CV No. 74720 is hereby REVERSED and SET ASIDE and another judgment entered denying the application for land registration of the subject properties.

SO ORDERED.

JOSE CATRAL MENDOZA

                                                                                                Associate Justice

WE CONCUR:

ANTONIO T. CARPIO

Associate Justice

Chairperson

PRESBITERO J. VELASCO, JR.           DIOSDADO M. PERALTA                     

          Associate Justice                                         Associate Justice

ROBERTO A. ABAD

Associate Justice

A T T E S T A T I O N

I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

                   ANTONIO T. CARPIO

                          Associate Justice

                                                                 Chairperson, Second Division

C E R T I F I C A T I O N

Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson’s Attestation, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

                                                                      RENATO C. CORONA

                                                                               Chief Justice

^* Designated as additional member in lieu of Associate Justice Antonio Eduardo B. Nachura, per Special Order No. 933 dated January 24, 2011.

^[1]Rollo, pp. 29-50. Penned by Associate Justice Vicente Q. Roxas with Associate Justice Portia Aliño-Hormachuelos and Associate Justice Juan Q. Enriquez, Jr., concurring.

^[2] CA rollo, pp. 81-92.

^[3] Id. at 75-80.

^[4] Rollo, p. 32.

^[5] Id. at 33-34.

^[6] Id. at 38.

^[7] Amending and Codifying the Laws Relative to Registration of Property and for other Purposes.

^[8] Extending the Period of Filing Applications for Administrative Legalization (Free Patent) and Judicial Confirmation of Imperfect and Incomplete Titles to Alienable and DisposableLands in the Public Domain under Chapter VII and Chapter VIII of Commonwealth Act No. 141, as amended, for eleven (11) years commencing on January 1, 1977.

^[9]  Republic of the Philippines v. Ching, G.R. No. 186166, October 20, 2010.

^[10] Republic of the Philippines v. Dela Paz, G.R. No. 171631, November 15, 2010.

^[11] Records, p. 62.

^[12] Id. at 63.

^[13] Id. at 105-112.

^[14] TSN, October 16, 1992, pp. 4-5.

^[15] TSN, October 16, 1992, p. 8.

^[16] Exh. “J,” Records, p. 113.

^[17] TSN, October 16, 1992, p. 11.

^[18] TSN, October 16, 1992, pp. 8-10.

^[19] TSN, October 16, 1992, p. 11.

^[20] Records, p. 10.

^[21] Id. at 22-23.

^[22] TSN, November 6, 1992, p. 7.

^[23] TSN, November 6, 1992, p. 21.

^[24] Republic of the Philippines v. Dela Paz, supra note 10.

^[25] Records, p. 117.

^[26] Id. at 118.

^[27] TSN, November 11, 1992, pp. 3-4.

^[28] Records, pp. 119-121.

^[29] TSN, November 11, 1992, p. 5.

^[30] Records, pp. 124-132.

^[31] TSN, November 11, 1992, p. 11.

^[32] Republic of the Philippines v. Dela Paz, supra note 10.

^[33] Republic of the Philippines v. Lao, 453 Phil. 189 (2003).

CASE NO. 2011-0087: COMMISSIONER OF INTERNAL REVENUE VS. MANILA BANKERS’ LIFE INSURANCE CORPORATION (G.R. NO. 169103, 16 MARCH 2011, LEONARDO-DE CASTRO, J.) SUBJECT: DOCUMENTARY STAMP TAX ON INSURANCE POLICY. (BRIEF TITLE: CIR VS. MANILA BANKERS) 

Republic of the Philippines

Supreme Court

Manila

FIRST DIVISION

x – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – –  x

D E C I S I O N

LEONARDO-DE CASTRO, J.:

This is a Petition for Review on Certiorari^[1] filed by the Commissioner of Internal Revenue (CIR) of the April 29, 2005 Decision^[2] and July 27, 2005 Resolution^[3] of the Court of Appeals in CA-G.R. SP No. 70600, which upheld the April 4, 2002 Decision^[4] of the Court of Tax Appeals (CTA) in CTA Case No. 6189.

The facts as found by the CTA and Court of Appeals are undisputed.

Respondent Manila Bankers’ Life Insurance Corporation is a duly organized domestic corporation primarily engaged in the life insurance business.^[5]

On May 28, 1999, petitioner Commissioner of Internal Revenue issued Letter of Authority No. 000020705^[6] authorizing a special team of Revenue Officers to examine the books of accounts and other accounting records of respondent for taxable year “1997 & unverified prior years.”^[7]

On December 14, 1999, based on the findings of the Revenue Officers, the petitioner issued a Preliminary Assessment Notice^[8] against the respondent for its deficiency internal revenue taxes for the year 1997.  The respondent agreed to all the assessments issued against it except to the amount of P2,351,680.90 representing deficiency documentary stamp taxes on its policy premiums and penalties. ^[9]

Thus, on January 4, 2000, the petitioner issued against the respondent a Formal Letter of Demand^[10] with the corresponding Assessment Notices attached,^[11] one of which was Assessment Notice No. ST-DST2-97-0054-2000^[12] pertaining to the documentary stamp taxes due on respondent’s policy premiums: 

Documentary Stamp Tax on Policy Premiums

Assessment No. ST-DST2-97-0054-2000

Tax Due                                                                                    3,954,955.00

Less: Tax Paid                                                                            2,308,505.74

Tax Deficiency                                                                           1,646,449.26

Add:    20% Int./a                                                                         680,231.64

                        Recommended Compromise Penalty-                                                                                  

                          Late Payment           _____          25,000.00

Total Amount Due                                                                     2,351,680.90^[13]

The tax deficiency was computed by including the increases in the life insurance coverage or the sum assured by some of respondent’s life insurance plans^[14]:

                                                           ISSUED                     INCREASED

ORDINARY                               P648,127,000.00         P     74,755,000.00

GROUP                                         114,936,000.00              744,164,000.00

TOTAL                                        P763,063,000.00         P   818,919,000.00

GRAND TOTAL/TAX BASE                                        P1,581,982,000.00

TAX RATE                                                                              P0.50/200.00

TAX DUE                                                                       P       3,954,955.00

LESS: TAX PAID                                                           P       2,308,505.74

DEFICIENCY DST    –  BASIC                                    P       1,646,499.26

                                                –  20% INTEREST                                   680,231.64

                                                –  SURCHARGE                                       25,000.00

            TOTAL ASSESSMENT                                                 P       2,351,680.90^[15]

The amount of P818,919,000.00 comprises the increases in the sum assured for the respondent’s ordinary insurance – the “Money Plus Plan” (P74,755,000.00), and group insurance (P744,164,000.00).^[16]

On February 3, 2000, the respondent filed its Letter of Protest^[17] with the Bureau of Internal Revenue (BIR) contesting the assessment for deficiency documentary stamp tax on its insurance policy premiums.  Despite submission of documents on April 3, 2000,^[18] as required by the BIR in its March 20, 2000^[19] letter, the respondent’s Protest was not acted upon by the BIR within the 180-day period given to it by Section 228 of the 1997 National Internal Revenue Code (NIRC) within which to rule on the protest. Hence, on October 26, 2000, the respondent filed a Petition for Review with the CTA for the cancellation of Assessment Notice No. ST-DST2-97-0054-2000.  The respondent invoked the CTA’s March 30, 1993 ruling in the similar case of Lincoln Philippine Life Insurance Company, Inc. (now Jardine-CMA Life Insurance Company, Inc.) v. Commissioner of Internal Revenue,^[20] wherein the CTA held that the tax base to be used in computing the documentary stamp tax is the value at the time the instrument is issued because the documentary stamp tax is levied and paid only once, which is at the time the taxable document is issued.

On April 4, 2002, the CTA granted the respondents’ Petition with the dispositive portion as follows:

WHEREFORE, in the light of all the foregoing, respondent Commissioner of Internal Revenue is hereby ORDERED to CANCEL andWITHDRAW Assessment Notice No. ST-DST2-97-0054-2000 dated January 4, 2000 in the amount of P2,351,680.90 representing deficiency documentary stamp taxes for the taxable year 1997.^[21]

The CTA, applying the Tax Code Provisions then in force, held that:

[T]he documentary stamp tax on life insurance policies is imposed only once based on the amount insured at the time of actual issuance of such policies.  The documentary stamp tax which is in the nature of an excise tax is imposed on the document as originally issued.  Therefore, any subsequent increase in the insurance coverage resulting from policies which have been subjected to the documentary stamp tax at the time of their issuance, is no longer subject to the documentary stamp tax.^[22]

Aggrieved by the decision, the petitioner went to the Court of Appeals on a Petition for Review^[23] docketed as CA-G.R. SP No. 70600 on the ground that:

THE TAX COURT ERRED IN RULING THAT INCREASES IN THE COVERAGE OR THE SUM ASSURED BY AN EXISTING INSURANCE POLICY IS NOT SUBJECT TO THE DOCUMENTARY STAMP TAX. (DST).^[24]

            On April 29, 2005, the Court of Appeals sustained the cancellation of Assessment Notice No. ST-DST2-97-0054-2000 in its Decision, the decretal portion of which reads:

WHEREFORE, all considered and finding no merit in the herein appeal, judgment is hereby rendered upholding the April 4, 2002, CTA Decision in CTA Case No. 6189 entitled “Manila Bankers’ Life Insurance Corporation, Petitioner, versus Commissioner of Internal Revenue, Respondent.^[25]

The Court of Appeals, in upholding the decision of the CTA, said that the subject of the documentary stamp tax is the issuance of the instrument representing the creation, change or cessation of a legal relationship.^[26]  It further held that because the legal status or nature of the relationship embodied in the document has no bearing at all on the tax, the fulfillment of suspensive conditions incorporated in the respondent’s policies, as claimed by the petitioner, would still not give rise to new documentary stamp tax payments.^[27]

The petitioner asked for reconsideration of the above Decision and cited this Court’s March 19, 2002 Decision inCommissioner of Internal Revenue v. Lincoln Philippine Life Insurance Company, Inc.,^[28] the very same case the respondent invoked before the CTA.  The petitioner argued that in Lincoln, this Court reversed both the CTA and the Court of Appeals and sustained the validity of the deficiency documentary stamp tax imposed on the increase in the sum insured even though no new policy was issued because the increase, by reason of the “Automatic Increase Clause,” was already definite at the time the policy was issued.

On July 27, 2005, the Court of Appeals sustained its ruling, and stated that the Lincoln Case was not applicable because the increase in the sum assured in Lincoln’s insurance policy was definite and determinable at the time such policy was issued as the automatic increase clause, which allowed for the increase, formed an integral part of the policy; whereas in the respondent’s case, “the tax base of the disputed deficiency assessment was not [a] definite or determinable increase in the sum assured.”^[29]

The petitioner is now before us praying for the nullification of the Court of Appeals’ April 29, 2005 Decision and July 27, 2005 Resolution and to have the assessment for deficiency documentary stamp tax on respondent’s policy premiums, plus 25% surcharge for late payment and 20% annual interest, sustained^[30] on the following arguments:

A.

THE APPLICABLE PROVISIONS OF THE NIRC AT THE TIME THE ASSESSMENT FOR DEFICIENCY DOCUMENTARY STAMP TAX WAS ISSUED PROVIDE THAT DOCUMENTARY STAMP TAX IS COLLECTIBLE NOT ONLY ON THE ORIGINAL POLICY BUT ALSO UPON RENEWAL OR CONTINUANCE THEREOF.

B.

THE AMOUNT INSURED BY THE POLICY AT THE TIME OF ITS ISSUANCE NECESSARILY INCLUDED THE ADDITIONAL SUM AS A RESULT OF THE EXERCISE OF THE OPTION UNDER THE “GUARANTEED CONTINUITY” CLAUSE IN RESPONDENT’S INSURANCE POLICIES.

C.

THE “GUARANTEED CONTINUITY” CLAUSE OFFERS TO THE INSURED AN OPTION TO AVAIL OF THE RIGHT TO RENEW OR CONTINUE THE POLICY.  IF AND WHEN THE INSURED AVAILS OF SUCH OPTION AND SUCH GUARANTEED CONTINUITY CLAUSE TAKES EFFECT, THE INSURER IS LIABLE FOR DEFICIENCY DOCUMENTARY STAMP TAX CORRESPONDING TO THE INCREASE OF THE INSURANCE COVERAGE.

D.

SECTION 198 OF THE 1997 NIRC CLEARLY STATES THAT THE DOCUMENTARY STAMP TAX IS IMPOSABLE UPON RENEWAL OR CONTINUANCE OF ANY POLICY OF INSURANCE OR THE RENEWAL OR CONTINUANCE OF ANY CONTRACT BY ALTERING OR OTHERWISE, AT THE SAME RATE AS THAT IMPOSED ON THE ORIGINAL INSTRUMENT.^[31]

As can be gleaned from the facts, the deficiency documentary stamp tax was assessed on the increases in the life insurance coverage of two kinds of policies: the “Money Plus Plan,” which is an ordinary term life insurance policy; and the group life insurance policy.  The increases in the coverage of the life insurance policies were brought about by the premium payments made subsequent to the issuance of the policies.  The Money Plus Plan is a 20-year term ordinary life insurance plan with a “Guaranteed Continuity Clause” which allowed the policy holder to continue the policy after the 20-year term subject to certain conditions.  Under the plan, the policy holders paid their premiums in five separate periods, with the premium payments, after the first period premiums, to be made only upon reaching a certain age.  The succeeding premium payments translated to increases in the sum assured.  Thus, the petitioner believed that since the documentary stamp tax was affixed on the policy based only on the first period premiums, then the succeeding premium payments should likewise be subject to documentary stamp tax.  In the case of respondent’s group insurance, the deficiency documentary stamp tax was imposed on the premiums for the additional members to already existing and effective master policies.  The petitioner concluded that any additional member to the group of employees, who were already insured under the existing mother policy, should similarly be subjected to documentary stamp tax.^[32]

The resolution of this case hinges on the validity of the imposition of documentary stamp tax on increases in the coverage or sum assured by existing life insurance policies, even without the issuance of new policies.

In view of the fact that the assessment for deficiency documentary stamp tax covered the taxable year 1997, the relevant and applicable legal provisions are those found in the 1977 National Internal Revenue Code (Tax Code) as amended,^[33] to wit:

Section 173. Stamp Taxes Upon Documents, Loan Agreements, Instruments and Papers. — Upon documents, instruments, loan agreements and papers, and upon acceptances, assignments, sales and transfers of the obligation, right or property incident thereto, there shall be levied, collected and paid for, and in respect of the transaction so had or accomplished, the corresponding documentary stamp taxes prescribed in the following sections of this Title, by the person making, signing, issuing, accepting, or transferring the same wherever the document is made, signed, issued, accepted, or transferred when the obligation or right arises from Philippine sources or the property is situated in the Philippines,and the same time such act is done or transaction had: Provided, That whenever one party to the taxable document enjoys exemption from the tax herein imposed, the other party who is not exempt shall be the one directly liable for the tax. ^[34]

Section 183. Stamp Tax on Life Insurance Policies. — On all policies of insurance or other instruments by whatever name the same may be called, whereby any insurance shall be made or renewed upon any life or lives, there shall be collected a documentary stamp tax of fifty centavos on each two hundred pesos or fractional part thereof, of the amount insured by any such policy.^[35] (Emphases ours.)

Documentary stamp tax is a tax on documents, instruments, loan agreements, and papers evidencing the acceptance, assignment, sale or transfer of an obligation, right or property incident thereto.^[36]  It is in the nature of an excise tax because it is imposed upon the privilege, opportunity or facility offered at exchanges for the transaction of the business.  It is an excise upon the facilities used in the transaction of the business distinct and separate from the business itself.^[37]

To elucidate, documentary stamp tax is levied on the exercise of certain privileges granted by law for the creation, revision, or termination of specific legal relationships through the execution of specific instruments.  Examples of these privileges, the exercise of which are subject to documentary stamp tax, are leases of lands, mortgages, pledges, trusts and conveyances of real property. Documentary stamp tax is thus imposed on the exercise of these privileges through the execution of specific instruments, independently of the legal status of the transactions giving rise thereto.  The documentary stamp tax must be paid upon the issuance of these instruments, without regard to whether the contracts which gave rise to them are rescissible, void, voidable, or unenforceable. ^[38]

Accordingly, the documentary stamp tax on insurance policies, though imposed on the document itself, is actually levied on the privilege to conduct insurance business.  Under Section 173, the documentary stamp tax becomes due and payable at the time the insurance policy is issued, with the tax based on the amount insured by the policy as provided for in Section 183.

Documentary Stamp Tax

on the “Money Plus Plan”

The petitioner would have us reverse both the CTA and the Court of Appeals based on our decision in Commissioner of Internal Revenue v. Lincoln Philippine Life Insurance Company, Inc.^[39] 

The Lincoln case has been invoked by both parties in different stages of this case.  The respondent relied on the CTA’s ruling in the Lincoln case when it elevated its protest there; and when we reversed the CTA’s ruling therein, the petitioner called the Court of Appeals’ attention to it, and prayed for a decision upholding the assessment for deficiency documentary stamp tax just like in theLincoln case.

It is therefore necessary to briefly discuss the Lincoln case to determine its applicability, if any, to the case now before us. Prior to 1984, Lincoln Philippine Life Insurance Company, Inc. (Lincoln) had been issuing its “Junior Estate Builder Policy,” a special kind of life insurance policy because of a clause which provided for an automatic increase in the amount of life insurance coverage upon attainment of a certain age by the insured without the need of a new policy.  As Lincoln paid documentary stamp taxes only on the initial sum assured, the CIR issued a deficiency documentary stamp tax assessment for the year 1984, the year the clause took effect.  Both the CTA and the Court of Appeals found no basis for the deficiency assessment.  As discussed above, however, this Court reversed both lower courts and sustained the CIR’s assessment.

This Court ruled that the increase in the sum assured brought about by the “automatic increase” clause incorporated inLincoln’s Junior Estate Builder Policy was still subject to documentary stamp tax, notwithstanding that no new policy was issued, because the date of the effectivity of the increase, as well as its amount, were already definite and determinable at the time the policy was issued.  As such, the tax base under Section 183, which is “the amount fixed in the policy,” is “the figure written on its face and whatever increases will take effect in the future by reason of the ‘automatic increase clause.’” ^[40]  This Court added that the automatic increase clause was “in the nature of a conditional obligation under Article 1181,^[41] by which the increase of the insurance coverage shall depend upon the happening of the event which constitutes the obligation.” ^[42]

Since the Lincoln case, wherein the then CIR’s arguments for the BIR are very similar to the petitioner’s arguments herein, was decided in favor of the BIR, the petitioner is now relying on our ruling therein to support his position in this case.  Although the two cases are similar in many ways, they must be distinguished by the nature of the respective “clauses” in the life insurance policies involved, where we note a major difference.  In Lincoln, the relevant clause is the “Automatic Increase Clause” which provided for the automatic increase in the amount of life insurance coverage upon the attainment of a certain age by the insured, without any need for another contract.  In the case at bar, the clause in contention is the “Guaranteed Continuity Clause” in respondent’s Money Plus Plan, which reads:

GUARANTEED CONTINUITY

We guarantee the continuity of this Policy until the Expiry Date stated in the Schedule provided that the effective premium is consecutively paid when due or within the 31-day Grace Period.

We shall not have the right to change premiums on your Policy during the 20-year Policy term.

At the end of each twenty-year period, and provided that you have not attained age 55, you may renew your Policy for a further twenty-year period. To renew, you must submit proof of insurability acceptable to MBLIC and pay the premium due based on attained age according to the rates prevailing at the time of renewal.^[43]

A simple reading of respondent’s guaranteed continuity clause will show that it is significantly different from the “automatic increase clause” in Lincoln.  The only things guaranteed in the respondent’s continuity clause were: the continuity of the policy until the stated expiry date as long as the premiums were paid within the allowed time; the non-change in premiums for the duration of the 20-year policy term; and the option to continue such policy after the 20-year period, subject to certain requirements.  In fact, even the continuity of the policy after its term was not guaranteed as the decision to renew it belonged to the insured, subject to certain conditions.  Any increase in the sum assured, as a result of the clause, had to survive a new agreement between the respondent and the insured.  The increase in the life insurance coverage was only corollary to the new premium rate imposed based upon the insured’s age at the time the continuity clause was availed of.  It was not automatic, was never guaranteed, and was certainly neither definite nor determinable at the time the policy was issued. 

Therefore, the increases in the sum assured brought about by the guaranteed continuity clause cannot be subject todocumentary stamp tax under Section 183 as insurance made upon the lives of the insured. 

However, it is clear from the text of the guaranteed continuity clause that what the respondent was actually offering in its Money Plus Plan was the option to renew the policy, after the expiration of its original term.  Consequently, the acceptance of this offer would give rise to the renewal of the original policy. 

The petitioner avers that these life insurance policy renewals make the respondent liable for deficiency documentary stamp tax under Section 198.

Section 198 of the old Tax Code reads:

Section 198. Stamp Tax on Assignments and Renewals of Certain Instruments. – Upon each and every assignment or transfer of any mortgage, lease or policy of insurance, or the renewal or continuance of any agreement, contract, charter, or any evidence of obligation or indebtedness by altering or otherwise, there shall be levied, collected and paid a documentary stamp tax, at the same rate as that imposed on the original instrument.^[44]

Section 198 speaks of assignments and renewals.  In the case of insurance policies, this section applies only when such policy was assigned or transferred.  The provision which specifically applies to renewals of life insurance policies is Section 183:

Section 183. Stamp Tax on Life Insurance Policies. — On all policies of insurance or other instruments by whatever name the same may be called, whereby any insurance shall be made or renewed upon any life or lives, there shall be collected a documentary stamp tax of fifty centavos on each two hundred pesos or fractional part thereof, of the amount insured by any such policy. (Emphasis ours.)

Section 183 is a substantial reproduction of the earlier documentary stamp tax provision, Section 1449(j) of the Administrative Code of 1917.  Regulations No. 26, or The Revised Documentary Stamp Tax Regulations,^[45] provided the implementing rules to the provisions on documentary stamp tax under the Administrative Code of 1917.  Section 54 of the Regulations, in reference to what is now Section 183, explicitly stated that the documentary stamp tax imposed under that section is also collectible upon renewals of life insurance policies, viz:

Section 54. Tax also due on renewals. – The tax under this section is collectible not only on the original policy or contract of insurance but also upon the renewal of the policy or contract of insurance.

To argue that there was no new legal relationship created by the availment of the guaranteed continuity clause would mean that any option to renew, integrated in the original agreement or contract, would not in reality be a renewal but only a discharge of a pre-existing obligation.  The truth of the matter is that the guaranteed continuity clause only gave the insured the right to renew his life insurance policy which had a fixed term of twenty years.  And although the policy would still continue with essentially the same terms and conditions, the fact is, its maturity date, coverage, and premium rate would have changed.  We cannot agree with the CTA in its holding that “the renewal, is in effect treated as an increase in the sum assured since no new insurance policy was issued.”^[46]  The renewal was not meant to restore the original terms of an old agreement, but instead it was meant to extend the life of an existing agreement, with some of the contract’s terms modified.  This renewal was still subject to the acceptance and to the conditions of both the insured and the respondent.  This is entirely different from a simple mutual agreement between the insurer and the insured, to increase the coverage of an existing and effective life insurance policy.

It is clear that the availment of the option in the guaranteed continuity clause will effectively renew the Money Plus Plan policy, which is indisputably subject to the imposition of documentary stamp tax under Section 183 as an insurance renewed upon the life of the insured.

Documentary Stamp Tax

 on Group Life Insurance

          The petitioner is also asking this Court to sustain his deficiency documentary stamp tax assessment on the additional premiums earned by the respondent in its group life insurance policies. 

          This Court, in Pineda v. Court of Appeals^[47] has had the chance to discuss the concept of “group insurance,” to wit:

In its original and most common form, group insurance provides life or health insurance coverage for the employees of one employer.

The coverage terms for group insurance are usually stated in a master agreement or policy that is issued by the insurer to a representative of the group or to an administrator of the insurance program, such as an employer. The employer acts as a functionary in the collection and payment of premiums and in performing related duties.  Likewise falling within the ambit of administration of a group policy is the disbursement of insurance payments by the employer to the employees.  Most policies, such as the one in this case, require an employee to pay a portion of the premium, which the employer deducts from wages while the remainder is paid by the employer.  This is known as a contributory plan as compared to a non-contributory plan where the premiums are solely paid by the employer.

            Although the employer may be the titular or named insured, the insurance is actually related to the life and health of the employee.  Indeed, the employee is in the position of a real party to the master policy, and even in a non-contributory plan, the payment by the employer of the entire premium is a part of the total compensation paid for the services of the employee.  Put differently, the labor of the employees is the true source of the benefits, which are a form of additional compensation to them.^[48] (Emphasis ours.)

When a group insurance plan is taken out, a group master policy is issued with the coverage and premium rate based on the number of the members covered at that time.  In the case of a company group insurance plan, the premiums paid on the issuance of the master policy cover only those employees enrolled at the time such master policy was issued.  When the employer hires additional employees during the life of the policy, the additional employees may be covered by the same group insurance already taken out without any need for the issuance of a new policy. 

The respondent claims that since the additional premiums represented the additional members of the same existing group insurance policy, then under our tax laws, no additional documentary stamp tax should be imposed since the appropriate documentary stamp tax had already been paid upon the issuance of the master policy.  The respondent asserts that since the documentary stamp tax, by its nature, is paid at the time of the issuance of the policy, “then there can be no other imposition on the same, regardless of any change in the number of employees covered by the existing group insurance.”^[49]

To resolve this issue, it would be instructive to take another look at Section 183: On all policies of insurance or other instruments by whatever name the same may be called, whereby any insurance shall be made or renewed upon any life or lives.

The phrase “other instruments” as also found in the earlier version of Section 183, i.e., Section 1449(j) of the Administrative Code of 1917, was explained in Regulations No. 26, to wit:

Section 52. “Other instruments” defined. – The term “other instruments” includes any instrument by whatever name the same is called whereby insurance is made or renewed, i.e., by which the relationship of insurer and insured is created or evidenced, whether it be a letter of acceptance, cablegrams, letters, binders, covering notes, or memoranda. (Emphasis ours.)

Whenever a master policy admits of another member, another life is insured and covered.  This means that the respondent, by approving the addition of another member to its existing master policy, is once more exercising its privilege to conduct the business of insurance, because it is yet again insuring a life.  It does not matter that it did not issue another policy to effect this change, the fact remains that insurance on another life is made and the relationship of insurer and insured is created between the respondent and the additional member of that master policy.  In the respondent’s case, its group insurance plan is embodied in a contract which includes not only the master policy, but all documents subsequently attached to the master policy.^[50]  Among these documents are the Enrollment Cards accomplished by the employees when they applied for membership in the group insurance plan.  The Enrollment Card of a new employee, once registered in the Schedule of Benefits and attached to the master policy, becomes evidence of such employee’s membership in the group insurance plan, and his right to receive the benefits therein.  Everytime the respondent registers and attaches an Enrollment Card to an existing master policy, it exercises its privilege to conduct its business of insurance and this ispatently subject to documentary stamp tax as insurance made upon a life under Section 183.

The respondent would like this Court to ignore the petitioner’s argument that renewals of insurance policies are also subject to documentary stamp tax for being raised for the first time.  This Court was faced with the same dilemma in Commissioner of Internal Revenue v. Procter & Gamble Philippine Manufacturing Corporation,^[51] when the petitioner also raised an issue therein for the first time in the Supreme Court.  In addressing the procedural lapse, we said:

As clearly ruled by Us “To allow a litigant to assume a different posture when he comes before the court and challenges the position he had accepted at the administrative level,” would be to sanction a procedure whereby the Court – which is supposed to review administrative determinations – would not review, but determine and decide for the first time, a question not raised at the administrative forum.  Thus it is well settled that under the same underlying principle of prior exhaustion of administrative remedies, on the judicial level, issues not raised in the lower court cannot generally be raised for the first time on appeal. x x x.^[52]

However, in the same case, we also held that:

Nonetheless it is axiomatic that the State can never be in estoppel, and this is particularly true in matters involving taxation. The errors of certain administrative officers should never be allowed to jeopardize the government’s financial position.^[53] (Emphasis ours.)

Along with police power and eminent domain, taxation is one of the three basic and necessary attributes of sovereignty.^[54] Taxes are the lifeblood of the government and their prompt and certain availability is an imperious need.  It is through taxes that government agencies are able to operate and with which the State executes its functions for the welfare of its constituents.^[55]  It is for this reason that we cannot let the petitioner’s oversight bar the government’s rightful claim.

This Court would like to make it clear that the assessment for deficiency documentary stamp tax is being upheld not because the additional premium payments or an agreement to change the sum assured during the effectivity of an insurance plan are subject to documentary stamp tax, but because documentary stamp tax is levied on every document which establishes that insurance was made or renewed upon a life.

WHEREFORE, the petition is GRANTED.  The April 29, 2005 Decision and the July 27, 2005 Resolution of the Court of Appeals in CA-G.R. SP No. 70600 are hereby SET ASIDE.  Respondent Manila Bankers’ Life Insurance Corp. is hereby ordered to pay petitioner Commissioner of Internal Revenue the deficiency documentary stamp tax in the amount of P1,646,449.26, plus the delinquency penalties of 25% surcharge on the amount due and 20% annual interest from January 5, 2000 until fully paid.

SO ORDERED.

                                                TERESITA J. LEONARDO-DE CASTRO

Associate Justice

WE CONCUR:

RENATO C. CORONA

Chief Justice

Chairperson

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

RENATO C. CORONA

                                                            Chief Justice

^[1]               Under Rule 45 of the 1997 Rules of Civil Procedure.

^[2]               Rollo, pp. 54-62; penned by Associate Justice Godardo A. Jacinto with Associate Justices Bienvenido L. Reyes and Rosalinda Asuncion-Vicente, concurring.

^[3]               Id. at 64-71.

^[4]               Id. at 96-107.

^[5]               Id. at 79.

^[6]               Id. at 72.

^[7]               Id.

^[8]               Id. at 73-74.

^[9]               CA rollo, p. 37.

^[10]             Rollo, pp. 75-76.

^[11]             CA rollo, pp. 54-57.

^[12]             Id. at 58.

^[13]             Rollo, p. 76.

^[14]             CA rollo, p. 128.

^[15]             Rollo, p. 82.

^[16]             Id. at 145.

^[17]             CA rollo, p. 64.

^[18]             Id. at 117.

^[19]             Id. at 65.

^[20]             CTA Case No. 4583; rollo, p. 84.

^[21]             Rollo, p. 106.

^[22]             Id. at 104.

^[23]             Id. at 108-122.

^[24]             Id. at 115.

^[25]             Id. at 61.

^[26]             Id. at 60.

^[27]             Id.

^[28]             429 Phil. 154 (2002).

^[29]             Rollo, p. 66.

^[30]             Id. at 45-46.

^[31]             Id. at 27-29.

^[32]             CA rollo, pp. 128-129.

^[33]             Republic Act No. 8424 or the Tax Reform Act of 1997 became effective only on January 1, 1998.

^[34]             Presidential Decree No. 1158 as renumbered and amended by Section 32 of Presidential Decree No. 1994, November 5, 1985; Section 23 of Executive Order No. 273, July 25, 1987; and Section 1 of Republic Act No. 7660, December 23, 1993.

^[35]             Presidential Decree No. 1158 as amended by Section 29 of Annex of Presidential Decree No. 1457, June 11, 1978; Section 27 of Presidential Decree No. 1959, October 10, 1984; Section 45 of Presidential Decree No. 1994, November 5, 1985; and Section 23 of Executive Order No. 273, July 25, 1987.

^[36]             Commissioner of Internal Revenue v. First Express Pawnshop Company, Inc., G.R. Nos. 172045-46, June 16, 2009, 589 SCRA 253, 263.

^[37]             Lincoln Philippine Life Insurance Company, Inc. (Now Jardine-CMG Life Insurance Co. Inc.) v. Court of Appeals, 354 Phil. 896, 904 (1998).

^[38]             Philippine Home Assurance Corporation v. Court of Appeals, 361 Phil. 368, 372-373 (1999).

^[39]             Supra note 28.

^[40]             Commissioner of Internal Revenue v. Lincoln Philippine Life Insurance Company, Inc. supra note 28.

^[41]             New Civil Code.

^[42]             Commissioner of Internal Revenue v. Lincoln Philippine Life Insurance Company, Inc. supra note 28 at 161-162.

^[43]             CA rollo, p. 68.

^[44]             Presidential Decree No. 1158 as renumbered by Section 45 of Presidential Decree No. 1994, November 5, 1985 and Section 23 of Executive Order No. 273, July 25, 1987.

^[45]             March 26, 1924.  Amended by Regulations No. 77 (August 8, 1933); Revenue Regulations Nos. 4-68, (August 16, 1967); 1-72 (January 28, 1972); 3-75 (May 27, 1975); and Presidential Decree Nos. 1158 (June 3, 1977) and 1457.  See also Presidential Decree No. 1959 (October 15, 1984), re omnibus amendments to the Tax Code.

^[46]             Rollo, p. 106.

^[47]             G.R. No. 105562, September 27, 1993, 226 SCRA 754.

^[48]             Id. at 765-766.

^[49]             Rollo, p. 230.

^[50]             CA rollo, p. 107.

^[51]             243 Phil. 703 (1988).

^[52]             Id. at 709.

^[53]             Id.

^[54]          Compagnie Financiere Sucres Et Denrees v. Commissioner of Internal Revenue, G.R. No. 133834, August 28, 2006, 499 SCRA 664, 667-668.

^[55]             Proton Pilipinas Corporation v. Republic of the Philippines, represented by the Bureau of Customs, G.R. No. 165027, October 12, 2006, 504 SCRA 528, 547-548.