PEOPLE OF THE PHILIPPINES, PETITIONER, VS. LUCIO C. TAN, FORTUNE TOBACCO CORPORATION, ANTONIO P. ABAYA, HARRY C. TAN, CARMEN KHAO TAN, FLORENCIO C. SANTOS, SALVADOR F. MISON, RO…

People of the Philippines versus Lucio Tan

The Case

This is a petition for review on certiorari under Rule 45 brought by the People of the Philippines against Lucio Tan, Fortune Tobacco Corporation, and its corporate officers. The action arises from the dismissal of nine criminal informations for tax evasion by the Metropolitan Trial Court of Marikina City, which dismissal the Regional Trial Court of Marikina City and the Court of Appeals both sustained. The case matters because it fixes the boundaries of a prosecutor's discretion at the preliminary investigation stage, and because it teaches when a trial court may lawfully withhold a warrant of arrest despite the filing of an information.

Procedural History

The Commissioner of Internal Revenue filed a complaint with the Department of Justice charging Fortune Tobacco and its officers with fraudulent tax evasion for taxable year 1992. Two more complaints followed, for taxable years 1991 and 1990. The Regional Trial Court of Quezon City enjoined the preliminary investigations, and that injunction reached the Supreme Court, which initially dismissed the petition but later, on reconsideration, remanded the matter, set aside certain orders of the panel of prosecutors, and directed the Secretary of Justice to designate a new panel.

The new panel found reasonable ground to hold the respondents for trial, and nine informations for tax evasion were filed with the Metropolitan Trial Court of Marikina City. That court dismissed the informations. The Department of Justice Panel of State Prosecutors filed a petition for certiorari with the Regional Trial Court of Marikina City, which dismissed the petition as filed out of time. The Court of Appeals affirmed. The People then came to the Supreme Court by petition for review on certiorari.

Facts

On September 7, 1993, the Commissioner of Internal Revenue filed a complaint with the Department of Justice charging Fortune Tobacco Corporation, its corporate officers, nine other corporations, and their officers with fraudulent tax evasion for supposed non-payment of correct ad valorem, income, and value-added taxes for 1992. The complaint was referred to the Department of Justice Task Force on Revenue Cases. Two more complaints followed, for taxable years 1991 and 1990.

Respondents sought relief from the Regional Trial Court of Quezon City, which enjoined the preliminary investigations. On review, the Supreme Court initially dismissed the petition, but on reconsideration it set aside the orders of the panel of prosecutors and directed the Secretary of Justice to designate a new panel, which was ordered to furnish respondents the documents supporting the complaints and to give them time to submit counter-affidavits.

The new panel found substantial compliance by the Bureau of Internal Revenue with the order to produce documents and found sufficient ground to proceed. Respondents declined to file counter-affidavits, and the panel resolved the complaints in favor of the Bureau, finding reasonable ground to believe respondents probably guilty. Nine informations for tax evasion were filed with the Metropolitan Trial Court of Marikina City. Respondents opposed the issuance of warrants of arrest, and the Bureau of Internal Revenue itself moved to withdraw the informations. The trial court dismissed the informations, and the dismissal was upheld on certiorari and on appeal.

Issues

• Whether or not the Regional Trial Court and the Court of Appeals erred in upholding the dismissal of the criminal informations for tax evasion.
• Whether or not the trial court gravely abused its discretion in refusing to issue warrants of arrest upon the filing of the informations.
• Whether or not the dismissal of the informations, in light of the Bureau of Internal Revenue's own motion to withdraw them, was proper.

Applicable Provisions

Section 3(b) of Rule 112 of the Rules of Court, on the submission of counter-affidavits during preliminary investigation, provides:

If the respondent cannot be subpoenaed, or if subpoenaed, does not submit counter-affidavits within the ten (10) day period, the investigating officer shall resolve the complaint based on the evidence presented by the complainant.

This provision bears on the case because the new panel treated the respondents' failure to file counter-affidavits as a submission of the case for resolution.

Section 220 of the National Internal Revenue Code of 1997, on the approval of the Commissioner of Internal Revenue for the filing of criminal actions, provides:

No civil or criminal action for the recovery of taxes or the enforcement of any fine, penalty or forfeiture under this Code shall be filed in court without the approval of the Commissioner.

This provision bears on the case because respondents argued that the informations were filed without the Commissioner's approval, a defect they claimed was fatal.

Ruling

On the first issue, the Court held that the dismissal of the informations was proper. The Bureau of Internal Revenue, through its Commissioner, had itself moved to withdraw the informations after a reevaluation of the criminal action. The Court gave weight to the executive department's own determination that the criminal prosecution should not proceed, and it found no grave abuse of discretion in the trial court's action.

On the second issue, the Court held that the trial court did not gravely abuse its discretion in declining to issue warrants of arrest. The finding of probable cause for the issuance of a warrant is a judicial determination that the trial court must make independently, and it may decline to issue the warrant where the evidence before it does not support a finding of probable cause.

On the third issue, the Court held that the withdrawal of the informations by the Bureau of Internal Revenue, the very agency that initiated the complaints, confirmed that the prosecution could not be sustained. The Court emphasized that the preliminary investigation is not the occasion to determine the correctness of the tax assessment, but only whether the acts complained of violate the Tax Code.

Doctrine

A Bar candidate must retain these rules. First, the finding of probable cause for the issuance of a warrant of arrest is a judicial function, and the trial court may withhold the warrant where the evidence does not support it. Second, the preliminary investigation determines only whether there is reasonable ground to believe the accused is probably guilty, not the correctness of the tax assessment. Third, where the agency that initiated the criminal complaint itself moves to withdraw the informations after reevaluation, the trial court may properly dismiss them. These rules tie back to Section 3(b) of Rule 112, which allows the investigating officer to resolve the complaint on the complainant's evidence when the respondent does not submit counter-affidavits, and to Section 220 of the National Internal Revenue Code, which requires the Commissioner's approval for the filing of criminal actions.

Disposition

The Supreme Court denied the petition and affirmed the dismissal of the criminal informations against the respondents.

Remember This

The single line worth memorizing is that probable cause for a warrant of arrest is a judicial determination that the trial court may withhold, and that the agency that filed the complaint may itself cause its withdrawal. Examiners like to use this case on the separation of powers between the prosecutor and the judge at the preliminary investigation stage, and on the effect of the Commissioner of Internal Revenue's approval requirement under Section 220.