People v. Arnault
REITERATIONFacts
The Antecedents: Jean L. Arnault, Vice-President of "North Manila Development Company, Inc." and "Associated Estates, Inc.", was authorized to act as attorney-in-fact for Ernest H. Burt, a non-resident alien, in the resale of two haciendas to the Rural Progress Administration. The total sale price was P3,500,000, from which Arnault received a net profit of P1,480,000 for Burt. Arnault was accused of willfully and unlawfully failing to pay the corresponding income tax on this net profit, amounting to P1,089,270, despite repeated demands. Procedural History: In the Court of First Instance of Manila, after five prosecution witnesses testified, Arnault, with the prosecution's consent, withdrew his plea of not guilty and entered a plea of guilty upon re-arraignment. The court sentenced him to pay a fine of P1,000, to indemnify the Government in the sum of P1,089,270, with subsidiary imprisonment in case of insolvency, and to pay costs. The Petition: Arnault appealed the decision, primarily assailing the imposition of the indemnity and subsidiary imprisonment, and also attacking the sufficiency of the information and the applicability of the cited legal provisions.
Issue(s)
Whether the information was fatally defective for failing to specify the exact date and year the profit was earned and the haciendas were sold. Whether Section 121 of the National Internal Revenue Code (NIRC), cited in the information, was applicable, or if Section 73 of the same Code was the correct provision. Whether Section 55 of the NIRC was applicable to the accused. Whether the trial court erred in holding the accused criminally responsible for the failure to pay income tax, failing to distinguish between the corporate personality and that of its officers. Whether the Collector of Internal Revenue's discretion to hold either the owner or the agent criminally responsible for tax evasion constitutes an unconstitutional delegation of legislative power. Whether the trial court erred in sentencing the appellant to indemnify the Government in the amount of the tax due, with subsidiary imprisonment in case of insolvency.
Ruling
The Supreme Court modified the decision of the trial court. It affirmed the conviction and the fine but deleted the indemnity of P1,089,270 and the subsidiary imprisonment for its non-payment. The Court imposed a penalty of three (3) months imprisonment, with the accessories of the law, in addition to the fine. The Government was advised to pursue civil remedies for the collection of the tax.
Ratio Decidendi
On the sufficiency of the information regarding dates: The Court held that the information was not fatally defective. While it did not explicitly state the exact year the profit was earned, the allegations that the sale occurred on or about May 29, 1950, and for sometime prior thereto, from which a net profit was received, allowed for a fair inference that the sale and receipt of profit happened before that date. The purpose of an information is to apprise the defendant of the facts constituting the offense, and the defendant was sufficiently informed, as evidenced by his plea of guilty. The Court noted that the timing of the sale and receipt of income could be inferred from the statutory deadlines for tax returns and payments. On the applicability of Section 121 vs. Section 73 of the NIRC: The Court agreed with the appellant that Section 121 of the NIRC, which pertains to gift taxes, was not the applicable provision. Instead, Section 73 of the same Code, regarding income tax, was the correct one. However, the Court reiterated the well-settled rule that the real nature of the crime is determined by the facts alleged, not by the specific provision cited. Since the information clearly described the profit, the income tax due, and the failure to pay, the error in citing the wrong provision did not vitiate the information. On the applicability of Section 55 of the NIRC: The Court found Section 55 of the NIRC applicable. While the first part of the section might not be entirely clear, a careful examination of the entire section, particularly its latter part, shows that the intent of Title II of the Code, under which Section 55 falls, is to tax all gains, profits, or income. The law mandates that such tax may be paid by the owner of the profit or income, or by the person having the receipt, custody, control, or disposal of the same. In this case, Arnault, as the person who received the profit, fell under this category. On distinguishing corporate personality from officers: The Court rejected the contention that the trial court failed to distinguish between the corporate personality and its officers. The information clearly alleged that Arnault personally received the net profit for Ernest H. Burt. Regardless of his position as Vice-President of the corporations acting as attorneys-in-fact, the fact remained that he personally handled the profit, making him liable under Section 55 of the NIRC for having receipt, custody, control, or disposal of the money for Burt, not for the corporations. On delegation of legislative power: The Court disagreed with the argument that the Collector of Internal Revenue's discretion to prosecute either the owner or the agent constituted an unconstitutional delegation of legislative power. The Court explained that the Legislature defines who is responsible for tax payment. The Collector merely executes the law and determines, based on the circumstances, which party could have paid the tax. In this case, Burt was not in the Philippines, and Arnault had custody and control of the profit. Therefore, the Collector was merely enforcing the law by prosecuting Arnault, who had the duty to pay the tax for the owner. On indemnity and subsidiary imprisonment for tax collection: The Court held that there was no legal basis for imposing the indemnity of P1,089,270 and subsidiary imprisonment for its non-payment. The National Internal Revenue Code provides for penalties like fines and imprisonment for tax evasion but does not provide for the collection of the tax itself through criminal proceedings. The Code specifies civil remedies, such as distraint or judicial action, for tax collection. The Court emphasized that the method prescribed by statute for tax collection is generally exclusive. Furthermore, Section 353 of the NIRC, which provides for subsidiary penalty for fines, does not mention subsidiary imprisonment for unpaid indemnity, indicating the Legislature's intent to exclude tax collection from criminal prosecution. The Court also distinguished the civil liability arising from criminal acts under the Revised Penal Code from the civil obligation to pay taxes, which precedes criminal liability under the NIRC.
Main Doctrine
Conviction for failure or neglect to pay a tax, unless expressly provided by law, does not include payment of indemnity to the State in the amount of the tax not paid. The collection of taxes is primarily governed by civil remedies provided by statute.