BACHE & CO. (PHIL.), INC. AND FREDERICK E. SEGGERMAN, PETITIONERS, VS. HON. JUDGE VIVENCIO M. RUIZ, MISAEL P. VERA, IN HIS CAPACITY AS COMMISSIONER OF INTERNAL REVENUE, ARTURO L…

This is an original action of certiorari, prohibition and mandamus,
with prayer for a writ of preliminary mandatory and prohibitory
injunction.  In their petition Bache
& Co. (Phil.), Inc., a corporation duly organized and existing under the
laws of the Philippines, and its President, Frederick E. Seggerman,
pray this Court to declare null and void Search Warrant No. 2-M-70 issued by
respondent Judge on February 25, 1970; to order respondents to desist from
enforcing the same and/or keeping the documents, papers and effects seized by
virtue thereof, as well as from enforcing the tax assessments on petitioner
corporation alleged by petitioners to have been made on the basis of the said
documents, papers and effects, and to order the return of the latter to
petitioners.  We gave due course to the
petition but did not issue the writ of preliminary injunction prayed for
therein.

The pertinent facts of this case, as gathered from the record,
are as follows:

On February 24, 1970, respondent Misael
P. Vera, Commissioner of Internal Revenue, wrote a letter addressed to
respondent Judge Vivencio M. Ruiz requesting the
issuance of a search warrant against petitioners for violation of Section 46(a)
of the National Internal Revenue Code, in relation to all other pertinent provisions
thereof, particularly Sections 53, 72, 73, 208 and 209, and authorizing Revenue
Examiner Rodolfo de Leon, one of herein respondents, to make and file the application
for search warrant which was attached to the letter.

In the afternoon of the following day, February 25, 1970, respondent de Leon and his
witness, respondent Ar­turo Logronio, went to the
Court of First Instance of Rizal.  They brought with them the following
papers:  res­pondent Vera’s aforesaid
letter-request; an application for search warrant already filled up but still
unsigned by respondent de Leon; an affidavit of respondent Logronio
subscribed before respondent de Leon; a deposition in printed form of
respondent Logronio already accom­plished and signed
by him but not yet subscribed; and a search warrant already accomplished but
still unsigned by respondent Judge.

At that time respondent Judge was hearing a cer­tain case; so, by
means of a note, he instructed his De­puty Clerk of Court to take the
depositions of respond­ents de Leon and Logronio.  After the session had ad­journed, respondent
Judge was informed that the deposi­tions had already been taken.  The stenographer, upon re­quest of respondent
Judge, read to him her stenographic notes; and thereafter, respondent Judge
asked respondent Logronio to take the oath and warned
him that if his de­position was found to be false and without legal basis, he
could be charged for perjury.  Respondent
Judge signed respondent de Leon’s application for search warrant and respondent
Logronio’s deposition, Search Warrant No. 2-M-70 was
then signed by respondent Judge and accor­dingly issued.

Three days later, or on February
28, 1970, which was a Saturday, the BIR agents served the search
warrant on petitioners at the offices of petitioner
corporation on Ayala Avenue, Makati, Rizal.  Petitioners’ lawyers protested the search on
the ground that no formal com­plaint or transcript of testimony was attached to
the warrant.  The agents nevertheless
proceeded with their search which yielded six boxes of documents.

On March 3, 1970, petitioners filed a petition with the Court of
First Instance of Rizal praying that the search
warrant be quashed, dissolved or recalled, that preliminary prohibitory and
mandatory writs of injunction be issued, that the search warrant be declared
null and void, and that the respondents be ordered to pay peti­tioners, jointly
and severally, damages and attorney’s fees. 
On March 18, 1970,
the respondents, thru the So­licitor General, filed an answer to the
petition.  After hearing, the court,
presided over by respondent Judge, issued on July 29, 1970, an order dismissing the petition for
dissolution of the search warrant.  In
the meantime, or on April 16, 1970,
the Bureau of Internal Revenue made tax assessments on petitioner corporation
in the total sum of P2,594,729.97, partly, if not en­tirely,
based on the documents thus seized. 
Petitioners came to this Court.

The petition should be granted for the following reasons:

1.  Respondent Judge failed
to personally examine the complainant and his witness.

The pertinent provisions of the Constitution of the Philippines
and of the Revised Rules of Court are:

“(3)  The right of the people to be secure in their
persons, houses, papers and effects against unreasonable searches and seizures
shall not be violated, and no warrants shall issue but upon probable cause, to
be determined by the judge after examination under oath or affirmation of the
complainant and the witnesses he may produce, and particu­larly describing the
place to be searched, and the persons or things to be seized.” (Art. III,
Sec. 1, Constitution.)

“SEC. 3.  Requisites for issuing search warrant.  – A search warrant shall not issue but upon
probable cause in connection with one specific offense to be determined by the
judge or justice of the peace after examination under oath or affirmation of the
com­plainant and the witnesses he may produce, and particularly describing the
place to be searched and the persons or things to be seized.

“No search warrant shall issue for more than one specific
offense.

“SEC. 4.  Examination of the
applicant.  – The judge or
justice of the peace must, before issuing the warrant, personally examine on
oath or affirmation the complainant and any witnesses he may produce and take
their depositions in writing, and attach them to the record, in addition to any
affidavits presented to him.” (Rule 126, Revised Rules
of Court.)

The examination of the complainant and the witnes­ses he may
produce, required by Art. III, Sec. 1, par. 3, of the Constitution, and by Secs. 3 and 4, Rule 126 of the Revised Rules of Court,
should be conducted by the judge himself and not by others.  The phrase “which shall be determined by
the judge after examination un­der oath or affirmation of the complainant and
the wit­nesses he may produce,” appearing in the said constitutional
provision, was introduced by Delegate Francis­co as an amendment to the draft
submitted by the Sub-Committee of Seven. 
The following discussion in the Constitutional Convention (Laurel,
Proceedings of the Philippine Constitutional Convention, Vol. III, pp. 755-757)
is enlightening:

“SR. ORENSE.  Vamos a dejar compañero, los piropos y vamos
al grano.

En los casos de
una necesidad de actuar inmediatamente para que no se frustren los fines de la justicia mediante el registro inmediato y la incautacion del cuerpo del delito, no cree Su Señoria que causaria
cierta demora el procedimiento apuntado en su enmienda en tal forma que podria
frustrar los fines de la justicia o si Su Señoria encuentra un remedio para estos
casos con el fin de compaginar
los fines de la justicia
con los derechos del indi­viduo en su persona, bienes etcetera, etcetera.

“SR. FRANCISCO.  No puedo ver en la practica el caso hipotetico que Su Señoria pregunta por la sigutente razon:  el que solicita un mandamiento
de registro tiene que hacerlo por
escrito y ese es­crito no aparecera en la Mesa
del Juez sin que alguien vaya al juez a presen­tar ese escrito o peticion
de secuestro.  Esa persona que presenta el registro puede ser el mismo denunciante o alguna persona que solicita dicho mandamien­to de registro.  Ahora toda la enmien­da en esos casos consiste
en que haya peticion de registro y el juez no se atendra solamente a esa peticion sino que
el juez examinara a ese denunciante
y si tiene testigos tambien examinara a los testigos.

“SR. ORENSE.  No cree
Su Señoria que el tomar la declaracion de ese denunciante por escrito siempre
re­queriria algun tiempo?

“SR. FRANCISCO.  Seria cuestion de un par de horas, pero por
otro lado minimizamos en todo lo posible las vejaciones
injustas con la expedicion
& arbitraria de los mandamientos de registro.  Creo que entre dos ma­les
debemos escoger el menor.

x        x          x          x          x

“MR. LAUREL.  x x x The
reason why we are in favor of this amendment is be­cause we are incorporating
in our consti­tution something of a fundamental charac­ter.  Now, before a judge could issue a search
warrant, he must be under the obligation to examine personally under oath the
complainant and if he has any witness, the witnesses that he may pro­duce.  x x
x.”

The implementing rule in the Revised Rules of Court, Sec. 4, Rule
126, is more emphatic and candid, for it re­quires the judge, before issuing a
search warrant, to “personally examine on oath or affirmation the
complainant and any witnesses he may produce x x x.”

Personal examination by the judge of the complainant and his
witnesses is necessary to enable him to de­termine the existence or
non-existence of a probable cause, pursuant to Art. III, Sec. 1, par. 3, of the
Constitution, and Sec. 3, Rule 126 of the Revised Rules of Court, both of which
prohibit the issuance of warrants except “upon probable cause.” The
determination of whether or not a probable cause exists calls for the exercise
of judgment after a judicial appraisal of facts and should not be allowed to be
delegated in the absence of any rule to the contrary.

In the case at bar, no personal examination at all was conducted
by respondent Judge of the complainant (respondent de Leon) and his witness
(respondent Logronio).  While it is true that the complainant’s
application for search warrant and the witness’ printed-form deposition were
subscribed and sworn to before respondent Judge, the latter did not ask either
of the two any question the an­swer to which could possibly be the basis for
determining whether or not there was probable cause against herein pe­titioners.  Indeed, the participants seem to have
attached so little significance to the matter that notes of the pro­ceedings
before respondent Judge were not even taken. 
At this juncture it may be well to recall the salient facts.  The transcript of stenographic notes (pp.
61-76, April 1, 1970, Annex J-2 of the Petition) taken at the hearing of this
case in the court below shows that per instruction of respondent Judge, Mr. Eleodoro V. Gonzales, Special Deputy Clerk of Court, took
the depositions of the complainant and his witness, and that stenographic notes
thereof were taken by Mrs. Gaspar.  At that time respondent Judge was at the sala hearing a case. 
After respondent Judge was through with the hearing, Deputy Clerk
Gonzales, stenographer Gas­par, complainant de Leon
and witness Logronio went to res­pondent Judge’s
chamber and informed the Judge that they had finished the depositions.  Respondent Judge then requested the
stenographer to read to him her stenographic notes.  Special Deputy Clerk Gonzales testified as
follows:

“A    And
after finishing reading the stenographic notes, the Honorable Judge requested
or in­structed them, requested Mr. Logronio to raise
his hand and warned him if his depo­sition will be found to be false and with­out
legal basis, he can be charged criminal­ly for perjury.  The Honorable Court told Mr. Logronio whether he affirms the facts contained in his
deposition and the affida­vit executed before Mr. Rodolfo de Leon.

“Q   And
thereafter?

“A    And
thereafter, he signed the deposition of Mr. Logronio.

“Q   Who
is this he?

“A    The
Honorable Judge.

“Q   The
deposition or the affidavit?

“A    The
affidavit, Your Honor.”

Thereafter, respondent Judge signed the
search warrant.

The participation of respondent Judge in the proceed­ings which
led to the issuance of Search Warrant No. 2-M-70 was thus limited to listening
to the stenographer’s read­ing of her notes, to a few words of warning against
the commission of perjury, and to administering the oath to the complainant and
his witness.  This cannot be consi­dered
as a personal examination.  If there was
an exami­nation at all of the complainant and his witness, it was the one
conducted by the Deputy Clerk of Court. 
But, as already stated, the Constitution and the rules require a
personal examination by the judge.  It
was precisely on account of the intention of the delegates to the
Constitutional Convention to make it a duty of the issuing judge to personally
examine the complainant and his witnesses that the question of how much time
would be consumed by the judge in examining them came up before the Convention,
as can be seen from the record of the proceedings quoted above.  The reading of the stenographic notes to
respondent Judge did not constitute sufficient compliance with the
constitutional mandate and the rule; for by that manner respondent Judge did
not have the opportunity to observe the demeanor of the complainant and his
witness, and to propound initial and fol­low-up questions which the judicial
mind, on account of its training, was in the best position to conceive.  These were important in arriving at a sound
inference on the all-im­portant question of whether or not there was probable
cause.

2.  The search warrant was
issued for more than one specific offense.

Search Warrant No. 2-M-70 was issued for “[v]iolation of Sec. 46(a) of the
National Internal Revenue Code in re­lation to all other pertinent provisions
thereof particu­larly Secs. 53, 72,
73, 208 and 209.” The question is: 
Was the said search warrant issued “in connection with one spe­cific
offense,” as required by Sec. 3, Rule 126?

To arrive at the correct answer it is essential to examine
closely the provisions of the Tax Code referred to above.  Thus we find the following:

Sec. 46(a) requires the filing of income tax returns by
corporations.

Sec. 53 requires the withholding of income taxes at source.

Sec. 72 imposes surcharges for failure to render in­come tax
returns and for rendering false and fraudulent returns.

Sec. 73 provides the penalty for failure to pay the income tax,
to make a return or to supply the information required under the Tax Code.

Sec. 208 penalizes “[a]ny person
who distills, recti­fies, repacks, compounds, or manufactures any article sub­ject
to a specific tax, without having paid the privilege tax therefor,
or who aids or abets in the conduct of illicit distilling, rectifying,
compounding, or illicit manufacture of any article subject to specific tax x x x,” and provides that in
the case of a corporation, partnership, or associa­tion, the official and/or
employee who caused the violation shall be responsible.

Sec. 209 penalizes the failure to make a return of re­ceipts,
sales, business, or gross value of output removed, or to pay the tax due
thereon.

The search warrant in question was issued for at least four
distinct offenses under the Tax Code. 
The first is the violation of Sec. 46(a), Sec.
72 and Sec. 73 (the filing of income tax returns), which are interrelated.  The second is the violation of Sec. 53 (withholding
of income taxes at source).  The third is
the violation of Sec. 208 (unlawful pursuit of business or occupation); and the
fourth is the violation of Sec. 209 (failure to make a return of receipts,
sales, business or gross value of output actually removed or to pay the tax due
thereon).  Even in their classifica­tion
the six above-mentioned provisions are embraced in two different titles:  Secs. 46(a), 53, 72
and 73 are under Title II (Income Tax); while Secs.
208 and 209 are under Title V (Privilege Tax on Business and Occupation).

Respondents argue that Stonehill, et
al. vs. Diokno, et al., L-19550, June 19, 1967 (20
SCRA 383), is not ap­plicable, because there the search warrants were issued
for “violation of Central Bank Laws, Internal Revenue (Code) and Revised
Penal Code;” whereas, here Search Warrant No. 2-M-70 was issued for
violation of only one code, i.e., the National Internal Revenue Code.  The distinction is more ap­parent than real,
because it was precisely on account of the Stonehill
incident, which occurred sometime before the present Rules of Court took effect
on January 1, 1964, that this Court amended the former rule by inserting
therein the phrase “in connection with one specific offense,” and
adding the sentence “No search warrant shall issue for more than one
specific offense,” in what is now Sec. 3, Rule 126.  Thus we said in Stonehill:

“Such is the seriousness of the irregula­rities committed in
connection with the disput­ed search warrants, that this Court deemed it fit to
amend Section 3 of Rule 122 of the former Rules of Court by providing in its
counterpart, under the Revised Rules of Court that ‘a search warrant shall not
issue but upon probable cause in connection with one specific offense.’
Not satisfied with this qualification, the Court added thereto a paragraph,
directing that ‘no search warrant shall issue for more than one specific
offense.'”

3.  The search warrant does
not particularly describe the things to be seized.

The documents, papers and effects sought to be seized are
described in Search Warrant No. 2-M-70 in this manner:

“Unregistered and private books of ac­counts (ledgers,
journals, columnars, receipts and disbursements
books, customers ledgers); receipts for payments received; certificates of
stocks and securities; contracts, promis­sory notes and deeds of sale; telex
and coded messages; business communications; accounting and business records;
checks and check stubs; records of bank deposits and withdrawals; and records
of foreign remittances, covering the years 1966 to 1970.”

The description does not meet the requirement in Art. III, Sec.
1, of the Constitution, and of Sec. 3, Rule 126 of the Revised Rules of Court,
that the warrant should par­ticularly describe the things to be seized.

In Stonehill, this Court,
speaking thru Mr. Chief Justice Roberto Concepcion,
said:

“The grave violation of the Constitu­tion made in the
application for the con­tested search warrants was compounded by the
description therein made of the effects to be searched for and seized, to wit:

‘Books of accounts, financial re­cords, vouchers, journals,
correspon­dence, receipts, ledgers, portfolios, credit journals, typewriters,
and other documents and/or papers showing all business transactions including
disburse­ment receipts, balance sheets and relat­ed profit and loss
statements.’

“Thus, the warrants authorized the search for and seizure of
records pertaining to all business transactions of petitioners herein,
regardless of whether the transactions were legal or illegal.  The warrants sanctioned the seizure of all
records of the petitioners and the aforementioned corporations, whatever their
nature, thus openly contravening the explicit command of our Bill of Rights –
that the things to be seized be particularly described – as well as
tending to defeat its major objective: 
the elimination of general warrants.”

While the term “all business
transactions” does not appear in Search Warrant No. 2-M-70, the said
warrant nevertheless tends to defeat the major objective of the Bill of Rights,
i.e., the elimination of general warrants, for the language used therein is so
all-embracing as to include all conceivable records of petitioner corporation,
which, if seized, could possibly ren­der its business inoperative.

In Uy Kheytin,
et al. vs. Villareal, etc., et al., 42 Phil. 886,
896, this Court had occasion to explain the purpose of the requirement that the
warrant should particularly describe the place to be searched and the things to
be seized, to wit:

“x x x
Both the Jones Law (sec. 3) and Gen­eral Orders No. 58 (sec. 97) specifically
require that a search warrant should particularly describe the place to
be searched and the things to be seiz­ed. 
The evident purpose and intent of this require­ment is to limit the
things to be seized to those, and only those, particularly described in the
search warrant – to leave the officers of the law with no discretion regarding
what articles they shall seize, to the end that ‘unreasonable searches and
seizures’ may not be made, – that abuses may not be committed.  That this is the correct interpretation of
this con­stitutional provision is borne out by American autho­rities.”

The purpose as thus explained could,
surely and effectively, be defeated under the search warrant issued in this
case.

A search warrant may be said to particularly describe the things
to be seized when the description therein is as specific as the circumstances
will ordinarily allow (People vs. Rubio, 57 Phil., 384); or when the
description expresses a conclusion of fact – not of law – by which the warrant
officer may be guided in making the search and seizure (idem., dissent
of Abad Santos, J.); or when the things
describes are limited to those which bear direct relation to the offense for
which the warrant is being issued (Sec. 2, Rule 126, Revised Rules of
Court).  The here­in search warrant does
not conform to any of the foregoing tests. 
If the articles desired to be seized have any direct relation to an
offense committed, the applicant must necessarily have some evidence, other
than those articles, to prove the said offense; and the articles subject of
search and seizure should come in handy merely to strengthen such
evidence.  In this event, the description
contained in the herein disputed warrant should have mentioned, at least, the
dates, amounts, persons, and other pertinent data regarding the receipts of
payments, certificates of stocks and securities, contracts, promissory notes,
deeds of sale, messages and communications, checks, bank deposits and
withdrawals, records of foreign remittances, among others, enu­merated in the
warrant.

Respondents contend that certiorari does not lie because
petitioners failed to file a motion for reconsideration of respondent Judge’s
order of July 29, 1970.  The contention is with­out merit.  In the first place, when the questions raised
before this Court are the same as those which were squarely rais­ed in and
passed upon by the court below, the filing of a motion for reconsideration in
said court before certiorari can be instituted in this Court is no
longer a prerequisite.  (Pa­jo, etc., et al. vs. Ago, et al., 108
Phil., 905).  In the se­cond
place, the rule requiring the filing of a motion for re­consideration before an
application for a writ of certiorari can be entertained was never intended
to be applied without considering the circumstances.  (Matutina
vs. Buslon, et al. 109 Phil., 140.) In the
case at bar time is of the essence in view of the tax assessments sought to be
enforced by respond­ent officers of the Bureau of Internal Revenue against peti­tioner corporation, on account of which immediate and
more di­rect action becomes necessary.  (Matute vs. Court of Appeals, et al., 26
SCRA 768.) Lastly, the rule does not apply where, as in this case, the
deprivation of petitioners’ fundamental right to due process taints the
proceeding against them in the court below not only with irregularity but also
with nul­lity.  (Matute vs. Court of Appeals, et al., supra.)

It is next contended by respondents that a corporation is not
entitled to protection against unreasonable searches and seizures.  Again, we find no merit in the contention.

“Although, for the reasons above stated, we are of the opinion
that an officer of a corporation which is charged with a violation of a statute
of the state of its creation, or of an act of Congress passed in the exercise
of its constitutional powers, cannot refuse to produce the books and papers of
such corporation, we do not wish to be understood as holding that a corporation
is not entitled to immunity, under the 4th Amendment, against unreasonable
searches and seizures.  A corporation is,
after all, but an association of individuals under an assumed name and with a
distinct legal entity.  In organizing
itself as a collective body it waives no constitutional immunities appropriate
to such body.  Its property cannot be
taken without compensation.  It can only
be proceeded against by due process of law, and is protected, under the 14th Amendment,
against unlawful discrimination.  x x x.”
(Hale v. Henkel, 201 U.S.
43, 50 L. ed. 652.)

“In Linn v. United States, 163 C.C.A. 470, 251 Fed. 476, 480, it was thought that a
differ­ent rule applied to a corporation, on the ground that it was not
privileged from producing its books and papers. 
But the rights of a corporation against unlawful search and seizure are
to be protected even if the same result might have been achieved in a lawful
way.” (Silverthorne Lumber Company, et al. v. United
States of Ame­rica, 251 U.S.
385, 64 L. ed. 319.)

In Stonehill,
et al. vs. Diokno, et al., supra, this Court
impliedly recognized the right of a corporation to object against unreasonable
searches and seizures, thus:

“As regards the first group, we hold that petitioners herein
have no cause of action to assail the legality of the contested warrants
and of the seizures made in pursuance thereof, for the simple reason that said
corporations have their respective personalities, separate and distinct from
the personality of herein petitioners, regardless of the amount of shares of
stock or of the interest of each of them in said corporations, and whatever the
offices they hold therein may be.  Indeed,
it is well settled that the legality of a seizure can be contested only by the
part whose rights is have been impaired thereby, and that the objection to an
unlawful search and seizure is purely personal and cannot be availed of by
third parties.  Consequently, petitioners
herein may not validly object to the use in evidence against them of the
documents, papers and things seized from the offices and premises of the
corporations adverted to above, since the right to object to the admission of
said papers in evidence belongs exclusively to the corporations, to whom the
seized effects belong, and may not be invoked by the corporate of­ficers in
proceedings against them in their individual capacity.  x x
x.”

In the Stonehill
case only the officers of the various corporations in whose offices documents,
papers and effects were searched and seized were the petitioners.  In the case at bar, the corporation to whom
the seized documents belong, and whose rights have thereby been impaired, is
itself a petitioner.  On that score, petitioner corporation here stands on a different footing
from the corporations in Stonehill.

The tax assessments referred to earlier in this opinion were, if
not entirely – as claimed by petitioners – at least partly – as in effect
admitted by respondents – based on the documents seized by virtue of Search
Warrant No. 2-M-70.  Furthermore, the
fact that the assessments were made some one and one-half months after the
search and seizure on February 25,
1970, is a strong indication that the documents thus seized served
as basis for the assessments.  These
assessments should therefore not be enforced.

PREMISES CONSIDERED, the petition is granted.  Accordingly, Search Warrant No. 2-M-70 issued
by respondent Judge is declared null and void; respondents are permanently
enjoined from enforcing the said search warrant; the documents, papers and
effects seized thereunder are ordered to be returned
to petitioners; and respondent officials of the Bureau of Internal Revenue and
their representatives are permanently enjoined from enforcing the assessments
mentioned in Annex “G” of the present petition, as well as other
assessments based on the documents, papers and effects seized under the search
warrant herein nullified, and from using the same against petitioners in any
criminal or other proceeding.  No
pronouncement as to costs.

Concepcion, C.J., Dizon,
Makalintal, Zaldivar,
Fernando, Teehankee,
and Makasiar, JJ., concur.

Reyes, J.B.L., J., concurs with
Justice Barredo.

Castro, J., in the result.

Barredo, J.,
concurs in separate opinion.