AMI Philippines, Inc. v. Court of Tax Appeals

NINTH DIVISION [CA-G.R. SP No. 47667. February 23, 1999.] AMI PHILIPPINES, INC. , petitioner , vs . COURT OF TAX APPEALS AND THE COMMISSIONER OF INTERNAL REVENUE , respondents . D E C I S I O N BRAWNER , J p : This is a Petition for Review of the Decision of the Court of Tax Appeals dated 20 January 1998 in CTA Case No. 5304, entitled AMI Philippines, Inc . , versus Commissioner of Internal Revenue, and the Resolution in the same case dated 21 April 1998. LibLex The antecedent facts are as follows. On 13 December 1995, petitioner AMI Philippines, Inc. (hereinafter referred to as "AMI", for brevity) filed before the respondent Court of Tax Appeals (hereinafter referred to as "CTA", for brevity) a Petition for Review alleging, inter alia , that it is a corporation fully organized and existing under the laws of the Republic of the Philippines; that it is engaged as an exporter of semi-conductor devices and is registered as a value-added entity pursuant to Section 107 of the National Internal Revenue Code and was issued the corresponding Value Added Tax (VAT) registration therefor; that from 01 January to 31 December 1994, it generated sales of P299,612,722.63; that the said amount was paid unto petitioner in inwardly-remitted foreign currency according to the pertinent regulations of the Central Bank of the Philippines in relation to Section 100 (a)(1) of the National Internal Revenue Code; that within the same period, petitioner paid VAT input taxes in the total amount of P4,653,402.87 on the whole of its sales amount "which are directly attributable to its zero-rated export sales" and did the necessary paperwork thereon; that petitioner has not applied the VAT input tax to offset any of its output tax liability from 01 January to 31 December 1994, or to any period thereafter; that the input taxes were paid by petitioner in the course of its business and duly supported by VAT invoices and receipts issued by its suppliers in compliance with the requirements of Sections 108(a) and 238 of the National Internal Revenue Code; that on 21 July 1995 it filed with Revenue District No. 52 of the Bureau of Internal Revenue a claim for the refund of the VAT input tax in the amount of P4,653,402.87 in accordance with Section 106(a) of the National Internal Revenue Code, but the same was not acted upon by the Revenue District Officer concerned. It thus implored the respondent CTA to order the Commissioner of Internal Revenue to refund the amount of P4,653,402.87 to it, and prayed for other reliefs. 1 Trial ensured, with the petitioner vigorously participating therein and pressing its cause, while the respondent Commissioner of Internal Revenue (hereinafter referred to as "Commissioner", for brevity) failing to present any evidence in his behalf. It was perhaps because of this perceived deficiency on the part of respondent Commissioner that petitioner felt confident of victory before the respondent tribunal, so We can just imagine petitioner's stupefaction when the CTA rendered a Decision with the following dispositive portion: "WHEREFORE, in the light of all the foregoing, petitioner's claim for issuance of tax credit certificate or refund of excess input VAT tax payments for the period January 1, 1994 to December 31, 1994 (sic) is hereby DENIED for failure of the petitioner to substantiate the fact that its input taxes have not been applied to any output tax liability." 2 Displeased with V.C. Mamalateo and Associates, the counsel which represented it during the trial phase of the case below, petitioner terminated the services of the said firm and secured the services of its present one, which promptly filed on 11 February 1998 a Motion for New Trial alleging excusable neglect on the part of its former counsel a ground therefor. On 21 April 1998, respondent CTA rendered the second questioned Resolution, finding that "WHEREFORE, in view of the foregoing, the instant Motion for New Trial/Reconsideration filed by petitioner is hereby DENIED for lack of merit." 3 Hence, the instant Petition, founded on the following: "A. Mistakes of counsel as to the competency of witnesses, the sufficiency of evidence, . . . failure to introduce evidence . . . are not proper grounds for a new trial, unless the incompetence of counsel be so great that his client is prejudiced and prevented from fairly presenting his case. "B. The motion for new trial must be verified and contain allegations of the claimed grounds, viz ., mistake and excusable negligence. It is supported by affidavits of merit to show that the petitioners have a good and valid defense against the complaint." 4 Regarding the second ground invoked by petitioner, there is no question as a perusal of the Motion for New Trial attached to the records of the present case 5 will indubitably show that the technical requirements for such motions have been fully and faithfully complied with by petitioners. We shall therefore confine ourselves to the merits of the instant Petition, as stated in the first ground thereof. In other words, the only question to be resolved is this: Is the failure of petitioner's former counsel who represented it before the CTA, to present evidence to the effect that the VAT input tax paid by petitioner was not applied to any output tax, constitutive of excusable neglect? We rule in the negative, and thus deny the Petition. 1. In order for "neglect" to effect a new trial, it must be in the nature of an "excusable neglect", or that "which ordinary prudence could not have guarded against". 6 The term "excusable negligence" as used in our law has no fixed legal meaning; that the question is one of fact dependent upon the circumstances. 7 Respondents correctly argue that ordinary prudence could have guarded against the tactical error committed by petitioner's former counsel in the conduct of the trial and the management of the case, specifically the presentation of evidence. That there is a need to present evidence of this nature is so obvious, petitioner's previous counsel could not have failed to take note of the matter using common circumspection. The fact that he failed to do so is therefore not excusable negligence within the contemplation of the adjective rule on new trials, more so since, as admitted by petitioner itself and concurred in by the CTA, the former counsel for petitioner is a renowned expert in the field of taxation, a former high-ranking official of the Bureau of Internal Revenue, and experienced in the ways of litigation. "The petitioner's submission that their counsel's failure to appeal on time should be regarded as excusable neglect or honest error is not compatible with his impressive credentials. He is a prestigious member of the bar and his conduct at the trial demonstrated his experience and skill as a trial lawyer. The petitioners themselves describe him as "a graduate of one of the top law schools in the country, a bar examiner in Remedial Law, a law professor in Remedial Law and other law subjects, a former National Officer of the Integrated Bar of the Philippines and a seasoned practitioner for more than 30 years." The procedural mistake might have been understandable in an ordinary lawyer but not in the case of the petitioners' former counsel." 8 2. Evidently, a mistake was committed by petitioner's erstwhile counsel. Unfortunately, AMI is bound by this mistake. The well-settled doctrine is that the client is bound by the mistakes of his lawyer. 9 3. Petitioner avers that "the CTA was apparently impressed by the manner and the zeal and vigor in which former counsel pursued the instant case and therefore concluded that, with the series of acts done by counsel, counsel was not negligent, excusable or gross. Undersigned counsel does not dispute this fact or the fact that previously former counsel had indeed pursued CTA Case No. 5304 vigorously and with competence." 10 This admission therefore negates their earlier contention that the incompetence of their prior counsel is so great as to be tantamount to a deprivation of their day in court, and perforce clearly establishes that while petitioner may have lost its right to present evidence, it was not denied his day in court. As the record show, petitioner, through counsel, actively participated in the proceedings below. They presented other evidence, and argued extensively, either in open court or through their able Memorandum. 11 Now petitioner wants us to order a trial de novo on the justification that his counsel was grossly inept. Such a reason is hardly plausible as the petitioner's new counsel should know. Otherwise, all a defeated party would have to do to salvage his case is claim neglect or mistake on the part of his counsel as a ground for reversing the adverse judgment. There would be no end to litigation if these were allowed as every shortcoming of counsel could be the subject of challenge by his client through another counsel who, if he is also found wanting, would likewise be disowned by the same client through another counsel, and so on ad infinitum This would render court proceedings indefinite, tentative and subject to reopening at any time by the mere subterfuge of replacing counsel. 12 4. A Motion for New Trial is a remedy in equity. In our jurisdiction, courts are both of law and equity. But never can one invoke equity in derogation of the strict mandates of the law, when the rights derived and vested thereunder are limpid. Aequitas nunquam contravenit leges . Under the circumstances of the case, the petitioner cannot come to Us in equity when the law is against him. WHEREFORE, FROM ALL THE FOREGOING, the Petition must be, as it is hereby, DENIED AND DISMISSED. No costs. SO ORDERED. Gutierrez-Sandoval and Villarama, JJ . , concur. 1. Rollo , pp. 43-50. 2. Id ., p. 31. 3. Id ., p. 41. 4. PETITION, Rollo , pp. 12, 15. 5. Id ., 66-73. 6. Section 1, Rule 37, 1997 Rules of Civil Procedure. 7. Vargas Plow Factory Inc. vs. Montesa, 69 O.G. 2935. 8. Lim Tupas v. Court of Appeals, G. R. No. L-89571, 6 February 1991 9. Aguila v. Court of First Instance of Batangas, Branch I, 160 SCRA 352; See also Vivero v. Santos, et al., 98 Phil. 500; Isaac v. Mendoza, 89 Phil. 279; Montes v. Court of First Instance of Tayabas, 48 Phil. 640; People v. Manzanilla, 43 Phil. 167; United States v. Dungca, 27 Phil. 274; and United States v. Umali, 15 Phil. 33. 10. PETITION, p. 9; Rollo , p. 15. 11. Rollo, p. 58-65. 12. Boyer-Roxas v. Court of Appeals, G.R. No. 100866, 14 July 1992.