SECOND DIVISION

Engine Displacement

It is likewise futile for petitioner to insist that the MOA executed by the BIR and the LTO on 10 September 1987, and the tripartite MOA executed by the BIR, LTO and BOC on 16 June 1988 are administrative regulations prescribing additional taxes.

An examination of the 10 September 1987 MOA shows that it was executed by the BIR and the LTO to curb the scheme employed by unscrupulous importers who evade paying the correct taxes and customs duties on imported vehicles by importing its parts, assembling them locally, and subsequently selling the finished products to local buyers. The aforementioned MOA mandated that prior to registration in the LTO of any assembled automobile using imported parts, a Certificate of Payment should first be obtained from the BIR which would then transmit the Certificate to the LTO to prove that all the BIR taxes required under existing laws have been paid.

The 16 June 1988 tripartite MOA among the BIR, LTO and the BOC virtually contained the same provisions. The MOA provided that prior to registration with the LTO of any assembled motor vehicle using imported component parts, a Certificate of Payment should first be secured from the BIR or the BOC which should then be duly forwarded to LTO. The Certificate would serve as proof that all taxes and customs duties required under existing laws, rules and regulations had already been settled.

Clearly, petitioner’s contention is unmeritorious. What Sec. 10, Art. III, of the Constitution prohibits is the passage of a law which enlarges, abridges or in any manner changes the intention of the contracting parties.21 [Joaquin, Bernas, Constitution of the Republic of the Philippines, 1987, Vol. 1, p. 322, citing US v. Diaz Conde, 42 Phil 766 (1922)] The Memorandum Orders and the two (2) Memoranda of Agreement do not impose any additional taxes which would unduly impair the contract of sale between petitioner and private respondent. Instead, these administrative regulations were passed to enforce payment of existing BIR taxes and customs duties at the time of importation.

But who should pay the BIR taxes and customs duties which the administrative regulations sought to enforce?

Petitioner contends that private respondent should be the one to pay the internal revenue taxes and customs duties. It claims that at the time the Memorandum Orders and the two (2) Memoranda of Agreement took effect the two (2) Elf trucks were already sold to private respondent, thus, it no longer owned the vehicles. Whatever payments private respondent made to the government after the sale were solely her concern and such burden should not be passed on to petitioner.22 [Rollo, p. 43.] Petitioner further argues that holding it liable for payment of BIR taxes and customs duties required under the administrative regulations violates the principle of non-retroactivity of laws under the Civil Code. Rtc-spped

Such contention deserves scant consideration. It is true that administrative rulings and regulations are generally prospective in nature.23 [Commissioner of Internal Revenue v. Telefunken Semiconductor Philippines Inc., G.R. No. 103915, 23 October 1995, 249 SCRA 401; ABS-CBN Broadcasting Corporation v. Court of Tax Appeals, G.R. No. 52306, 12 October 1981, 108 SCRA 142.] An inspection of the two (2) Memoranda of Agreement however demonstrates that their intent is to enforce payment of taxes on assemblers/manufacturers who import component parts without paying the correct assessments. The WHEREAS clause of the 10 September 1987 MOA clearly illustrates this -

While the WHEREAS clause of the 16 June 1988 MOA provides -

It is also apparent in Par. 9 of the 16 June 1988 MOA that the taxes to be enforced are designated as assembler’s/manufacturer’s tax. It states -

Thus, although private respondent is the one required by the administrative regulations to secure the Certificate of Payment for the purpose of registration, petitioner as the importer and the assembler/manufacturer of the two (2) Elf trucks is still the one liable for payment of revenue taxes and customs duties. Petitioner’s obligation to pay does not arise from the administrative regulations but from the tax laws existing at the time of importation. Hence, even if private respondent already owned the two (2) trucks when the Memorandum Orders and Memoranda of Agreement took effect, the fact remains that petitioner was still the one duty-bound to pay for the BIR taxes and customs duties.

It is also quite obvious that as between petitioner, who is the importer-assembler/manufacturer, and private respondent, who is merely the buyer, it is petitioner which has the obligation to pay taxes to the BIR and the BOC. Petitioner would be unjustly enriched if private respondent should be denied reimbursement.24 [Art. 22, Civil Code of the Philippines.] It would inequitably amass profits from selling assembled trucks even if it did not pay the taxes due on its imported spare parts. Imposing the tax burden on private respondent would only encourage the proliferation of smugglers who scheme to evade taxes by passing on their tax obligations to their unsuspecting buyers.

In a last ditch effort to exempt itself from liability, petitioner claims that it had paid the taxes due on the imported parts otherwise it would not have been able to obtain their release from the BOC and to register the vehicles with the LTO.

Non-sequitur. The fact that petitioner was able to secure the release of the parts from customs and to register the assembled trucks with the LTO does not necessarily mean that all taxes and customs duties were legally settled. As a matter of fact, the provisions of the two (2) Memoranda of Agreement clearly establish that the government is aware of the widespread registration of assembled motor vehicles with the LTO even if the taxes due on their imported component parts remain unpaid. Paragraph 1 of the 10 September 1987 MOA states -

While par. 1 of the 16 June 1988 MOA states - Scl-aw

Obviously, the two (2) Memoranda of Agreement were executed to prevent the anomalous circumstance, as in the case at bar, where assembled vehicles are registered with the LTO even if taxes and customs duties remain unpaid.

Besides, petitioner’s allegation that it already paid the BIR taxes and customs duties is highly doubtful. This entire controversy would have been avoided had petitioner simply furnished private respondent with the receipts evidencing payment of BIR taxes and customs duties. If only private respondent had the receipts to prove payment of such assessments then she would have easily secured the release of her two (2) Elf trucks. But petitioner arbitrarily and unjustly denied private respondent’s demands. Instead, petitioner obstinately insisted that it was no longer concerned with the problem involving the two (2) trucks since it no longer owned the vehicles after the consummation of the sale.

It is true that the ownership of the trucks shifted to private respondent after the sale. But petitioner must remember that prior to its consummation it expressly intimated to her that it had already paid the taxes and customs duties.25 [Records, p. 78.] Such representation shall be considered as a seller’s express warranty under Art. 1546 of the Civil Code which covers any affirmation of fact or any promise by the seller which induces the buyer to purchase the thing and actually purchases it relying on such affirmation or promise.26 [Padilla, Ambrosio, Civil Code Annotated, 1987, Vol. V, pp. 316-317.] It includes all warranties which are derived from express language, whether the language is in the form of a promise or representation.27 [Tolentino, Arturo, Civil Code of the Philippines, 1992, Vol. V, p. 104.] Presumably, therefore, private respondent would not have purchased the two (2) Elf trucks were it not for petitioner’s assertion and assurance that all taxes on its imported parts were already settled.

This express warranty was breached the moment petitioner refused to furnish private respondent with the corresponding receipts since such documents were the best evidence she could present to the government to prove that all BIR taxes and customs duties on the imported component parts were fully paid. Without evidence of payment, she was powerless to prevent the trucks from being impounded.

Under Art. 1599 of the Civil Code, once an express warranty is breached the buyer can accept or keep the goods and maintain an action against the seller for damages. This was what private respondent did. She opted to keep the two (2) trucks which she apparently needed for her business and filed a complaint for damages, particularly seeking the reimbursement of the amount she paid to secure the release of her vehicles.

WHEREFORE, the Decision of the Court of Appeals dated 22 January 1998 ordering petitioner HARRISON MOTORS CORPORATION to reimburse private respondent RACHEL A. NAVARRO for the taxes and duties she paid in the amount of P32,943.00 and to pay her attorney’s fees in the amount of P7,500.00 is AFFIRMED. In addition, the amount of P32,943.00 shall earn interest at the legal rate from 24 September 1990 when private respondent filed her complaint with the trial court until fully paid. Costs against petitioner.

SO ORDERED. Sc-lex

Mendoza, Quisumbing, Buena, and De Leon, Jr., JJ., concur.