Fernandez vs. People

Corporate officers may be held criminally liable for the corporation's fraudulent importation when they knowingly assent to or permit the unlawful acts, as the separate corporate personality cannot shield the actual, efficient actors from prosecution.

Kingson Trading International Corporation imported a shipment of steel bars from China. The import entry declared the goods as "round bars" with a value of US$692,254.00, attracting a 1% duty. Customs authorities discovered discrepancies: the actual goods were "reinforced/deformed steel bars" subject to a 7% duty, and the certified export documents from China showed a value of US$1,281,271.86, representing an undervaluation of more than 30%. A criminal information was filed against the corporate officers (petitioners herein), the alleged president, and the customs broker.

• Nature of the Case: Criminal prosecution for fraudulent practices against customs revenue under Section 3602 of the TCCP.
• The Importation: On May 6, 2006, a shipment declared as 2,406 bundles of "round bars" valued at US$692,254.00 arrived at the Port of Manila for Kingson.
• Discovery of Discrepancies: Customs agents discovered the shipment consisted of "rebars" (reinforced/deformed steel bars) subject to a higher duty rate. Certified export documents from China revealed a different consignee (Solid Sea Products H.K.), a different description, and a higher value of US$1,281,271.86.
• Seizure and Forfeiture: The shipment was seized. The Tariff Commission confirmed the correct tariff classification carried a 7% duty, not the declared 1%. The shipment was administratively forfeited in favor of the government.
• Criminal Proceedings: Petitioners, as President, Vice-President, Treasurer, and Corporate Secretary of Kingson, were charged. The prosecution's evidence showed the declared value was undervalued by more than 30%, constituting prima facie evidence of fraud.
• Defense: Petitioners claimed they merely relied on documents provided by the foreign shipper and had no direct participation in the fraud.
• Lower Court Findings: The CTA found the petitioners had knowledge of the transaction, failed to ensure its legality, and their denials were insufficient to rebut the presumption of fraud and knowledge.

• Lack of Fraud: Petitioners argued there was no fraud because the Import Entry and Internal Revenue Declaration (IEIRD) was prepared before the certified export documents from China existed.
• Reliance on Supplier: Petitioners maintained they merely relied on the commercial and shipping documents provided by the foreign supplier, Tianjin.
• No Direct Participation: Petitioners contended that even if the documents were fraudulent, the prosecution failed to prove their direct participation in the misdeclaration, misclassification, or undervaluation.

• Existence of Fraud: The People countered that the glaring discrepancies in consignee, description, and value between Kingson's documents and the authenticated export documents, coupled with the undervaluation exceeding 30%, constituted intentional fraud.
• Corporate Officers' Knowledge: The prosecution argued that as responsible corporate officers, petitioners had knowledge of and assented to the fraudulent transaction, especially given the substantial value of the shipment.
• Failure to Rebut Presumption: Respondent maintained that petitioners failed to discharge the burden of evidence that shifted to them to explain the discrepancies after the prosecution established a prima facie case.

• Factual Review: Whether the petition, raising questions of fact, is proper under Rule 45.
• Commission of the Crime: Whether all elements of violating Section 3602 of the TCCP were proven beyond reasonable doubt.
• Corporate Liability: Whether the corporate officers can be held criminally liable for the corporation's fraudulent importation.

• Factual Review: The petition was dismissed for raising questions of fact. The factual findings of the CTA, a specialized court, are generally final and binding, and petitioners failed to show any exception to warrant a review.
• Commission of the Crime: All elements were established. (1) An import entry was filed. (2) The entry was made using false documents, evidenced by the material discrepancies and the >30% undervaluation, which constitutes prima facie evidence of fraud under Section 2503 of the TCCP. (3) The intent to evade taxes was inferred from the willful misdeclaration and undervaluation.
• Corporate Liability: The corporate veil was pierced. Petitioners, by virtue of their positions, had knowledge of the importation. They assented to the unlawful acts or were grossly negligent in directing corporate affairs. The IEIRD signer (Fernandez) had a statutory duty to ensure its accuracy. The officers' collective action in rectifying a related contract demonstrated their awareness of the shipment details. Thus, they could not evade individual criminal responsibility.

• Piercing the Corporate Veil for Criminal Liability — The separate personality of a corporation does not shield from prosecution the corporate agent who knowingly and intentionally caused the corporation to commit a crime. To hold an officer liable, there must be a showing that they actively participated in or had the power to prevent the wrongful act, and assented to or were negligent in the corporate conduct.
• Prima Facie Evidence of Fraud in Customs — Under Section 2503 of the TCCP, an undervaluation or misdeclaration in weight, measurement, or quantity of more than 30% between the declared and actual value constitutes prima facie evidence of fraud penalized under Section 2530. This shifts the burden of evidence to the importer to provide a plausible explanation.

• "The existence of the corporate entity does not shield from prosecution the corporate agent who knowingly and intentionally caused the corporation to commit a crime. A corporate officer cannot protect himself behind a corporation where he is the actual, present and efficient actor." — This encapsulates the core ruling on piercing the corporate veil in criminal cases.
• "Petitioners' denial of the alleged fraud, insisting that Kingson's declarations were merely based on the documents provided by the foreign shipper, is pregnant with an admission, i.e., that they were personally aware of the details of the shipment and the contents of the submitted importation documents." — Illustrates the Court's reasoning that the defense itself implied knowledge.

• Rodriguez v. Court of Appeals, 318 Phil. 313 (1995) — Cited by the CTA En Banc as analogous precedent where corporate officers were held liable for permitting the use of falsified customs documents.
• Securities and Exchange Commission v. Price Richardson Corporation, 814 Phil. 589 (2017) — Cited for the principle that corporate officers may be held criminally liable if they actively participated in or had the power to prevent the corporation's wrongful act.
• Republic Gas Corporation v. Petron Corporation, 711 Phil. 348 (2013) — Cited for the doctrine that a corporate officer cannot hide behind the corporate personality to escape liability for corporate acts.

• Section 3602, Tariff and Customs Code of the Philippines (RA 1937) — Penalizes various fraudulent practices against customs revenue, including making an entry by means of any false or fraudulent invoice, statement, or practice.
• Section 2503, TCCP — Provides that an undervaluation, misdeclaration in weight, measurement, or quantity of more than 30% between the declared and actual value constitutes prima facie evidence of fraud.
• Section 1301, TCCP — Imposes a burden on persons making an import entry; statements under oath therein constitute prima facie evidence of knowledge and consent of the importer of violations if the importation is unlawful.

• Chief Justice Alexander G. Gesmundo (Chairperson)
• Justice Ramon Paul L. Hernando
• Justice Henri Jean Paul B. Inting
• Justice Rodil V. Zalameda (Ponente)
• Justice Maria Filomena D. Singh