Philippine Deposit Insurance Corporation v. Bureau of Internal Revenue
REITERATIONFacts
The Antecedents: The Monetary Board of the Bangko Sentral ng Pilipinas (BSP) prohibited the Rural Bank of Tuba (Benguet), Inc. (RBTI) from doing business, placed it under receivership, and designated the Philippine Deposit Insurance Corporation (PDIC) as receiver. Subsequently, PDIC determined RBTI was insolvent, leading the Monetary Board to direct PDIC to liquidate RBTI. PDIC filed a petition for assistance in liquidation with the Regional Trial Court (RTC) of La Trinidad, Benguet. Procedural History: The BIR intervened as a creditor, praying for the suspension of proceedings until PDIC secured a tax clearance under Section 52(C) of Republic Act No. 8424 (Tax Code of 1997). The RTC granted the BIR's motion, directing PDIC to secure the tax clearance. PDIC moved for partial reconsideration, arguing Section 52(C) does not cover closed banking institutions, but the motion was denied. PDIC then filed a petition for Certiorari with the Court of Appeals (CA), asserting the RTC acted with grave abuse of discretion. The CA affirmed the RTC's orders, holding that banks under liquidation by PDIC are covered by Section 52(C). The Petition: PDIC filed a petition for review on Certiorari with the Supreme Court, insisting that Section 52(C) of the Tax Code of 1997 is not applicable to banks ordered liquidated by the Monetary Board, as these are governed by Section 30 of the New Central Bank Act and are not under the supervision of the Securities and Exchange Commission (SEC).
Issue(s)
Whether Section 52(C) of the Tax Code of 1997, requiring a tax clearance for corporations contemplating dissolution or reorganization, applies to banks ordered placed under liquidation by the Monetary Board of the BSP. Whether the Regional Trial Court, acting as a liquidation court, committed grave abuse of discretion in requiring PDIC to secure a tax clearance as a prerequisite to approving the project of distribution of the assets of a closed bank.
Ruling
The petition is granted. The Decision and Resolution of the Court of Appeals are reversed and set aside. The Orders of the Regional Trial Court are nullified and set aside insofar as they direct PDIC to secure a tax clearance. PDIC is ordered to submit the final tax return of RBTI to the BIR, and the RTC is ordered to resume liquidation proceedings to determine claims and approve the project of distribution of assets, guided by the Civil Code provisions on preference of credit.
Ratio Decidendi
On the applicability of Section 52(C) of the Tax Code of 1997 to banks under liquidation by PDIC: The Supreme Court reiterated its ruling in In Re: Petition for Assistance in the Liquidation of the Rural Bank of Bokod (Benguet), Inc., holding that Section 52(C) of the Tax Code of 1997 is not applicable to banks ordered placed under liquidation by the Monetary Board. The Court explained that Section 52(C) pertains to the regulation between the SEC and the BIR concerning corporations contemplating dissolution or reorganization. In contrast, banks under liquidation by PDIC, as ordered by the Monetary Board, fall under the special rules and procedures of Section 30 of the New Central Bank Act, which does not mandate securing a tax clearance from the BIR. The Court emphasized that the dissolution of a corporation by the SEC is a different proceeding from the receivership and liquidation of a bank by the BSP, and it would be judicial legislation to substitute the SEC with the BSP in the interpretation of Section 52(C). On the grave abuse of discretion of the RTC in requiring a tax clearance: The Court found that the RTC committed grave abuse of discretion in requiring PDIC to secure a tax clearance before approving the project of distribution of assets. The Court reasoned that only a final tax return is necessary to satisfy the BIR's interest in determining the tax liabilities of a bank under liquidation. Requiring a tax clearance first creates an unreasonable and impossible "chicken-and-egg dilemma": the BIR will not issue a clearance if there are outstanding liabilities, but PDIC cannot pay those liabilities until the project of distribution, which requires the clearance, is approved. Furthermore, the Court noted that the law on liquidation of banks under Section 30 of the New Central Bank Act mandates that debts and liabilities be paid according to the rules on concurrence and preference of credit under the Civil Code. The BIR's insistence on prior compliance with the tax clearance requirement would grant absolute preference to tax liabilities, overriding the order of preference established in the Civil Code, particularly Article 2244, which gives preference to other claims over taxes due the National Government in certain instances. The Court stressed its duty to apply the law as written and not to give imprimatur to its violation.
Main Doctrine
Section 52(C) of the Tax Code of 1997, requiring a tax clearance for corporations contemplating dissolution or reorganization, is not applicable to banks ordered placed under liquidation by the Monetary Board of the Bangko Sentral ng Pilipinas. A tax clearance is not a prerequisite to the approval of the project of distribution of the assets of a bank under liquidation by the Philippine Deposit Insurance Corporation (PDIC).